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Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No.

182963 June 3, 2013

SPOUSES DEO AGNER and MARICON AGNER, Petitioners, vs. BPI FAMILY SAVINGS BANK, INC., Respondent. DECISION PERALTA, J.: This is a petition for review on certiorari assailing the April 30, 2007 Decision1 and May 19, 2008 Resolution2of the Court of Appeals in CAG.R. CV No. 86021, which affirmed the August 11, 2005 Decision3 of the Regional Trial Court, Branch 33, Manila City. On February 15, 2001, petitioners spouses Deo Agner and Maricon Agner executed a Promissory Note with Chattel Mortgage in favor of Citimotors, Inc. The contract provides, among others, that: for receiving the amount of Php834, 768.00, petitioners shall pay Php 17,391.00 every 15th day of each succeeding month until fully paid; the loan is secured by a 2001 Mitsubishi Adventure Super Sport; and an interest of 6% per month shall be imposed for failure to pay each installment on or before the stated due date.4 On the same day, Citimotors, Inc. assigned all its rights, title and interests in the Promissory Note with Chattel Mortgage to ABN AMRO Savings Bank, Inc. (ABN AMRO), which, on May 31, 2002, likewise assigned the same to respondent BPI Family Savings Bank, Inc.5 For failure to pay four successive installments from May 15, 2002 to August 15, 2002, respondent, through counsel, sent to petitioners a demand letter dated August 29, 2002, declaring the entire obligation as due and demandable and requiring to pay Php576,664.04, or surrender the mortgaged vehicle immediately upon receiving the letter.6 As the demand was left unheeded, respondent filed on October 4, 2002 an action for Replevin and Damages before the Manila Regional Trial Court (RTC). A writ of replevin was issued.7 Despite this, the subject vehicle was not seized.8 Trial on the merits ensued. On August 11, 2005, the Manila RTC Br. 33 ruled for the respondent and ordered petitioners to jointly and severally pay the amount of Php576,664.04 plus interest at the rate of 72% per annum from August 20, 2002 until fully paid, and the costs of suit.

Petitioners appealed the decision to the Court of Appeals (CA), but the CA affirmed the lower court’s decision and, subsequently, denied the motion for reconsideration; hence, this petition. Before this Court, petitioners argue that: (1) respondent has no cause of action, because the Deed of Assignment executed in its favor did not specifically mention ABN AMRO’s account receivable from petitioners; (2) petitioners cannot be considered to have defaulted in payment for lack of competent proof that they received the demand letter; and (3) respondent’s remedy of resorting to both actions of replevin and collection of sum of money is contrary to the provision of Article 14849 of the Civil Code and the Elisco Tool Manufacturing Corporation v. Court of Appeals10 ruling. The contentions are untenable. With respect to the first issue, it would be sufficient to state that the matter surrounding the Deed of Assignment had already been considered by the trial court and the CA. Likewise, it is an issue of fact that is not a proper subject of a petition for review under Rule 45. An issue is factual when the doubt or difference arises as to the truth or falsehood of alleged facts, or when the query invites calibration of the whole evidence, considering mainly the credibility of witnesses, existence and relevancy of specific surrounding circumstances, their relation to each other and to the whole, and the probabilities of the situation.11 Time and again, We stress that this Court is not a trier of facts and generally does not weigh anew evidence which lower courts have passed upon. As to the second issue, records bear that both verbal and written demands were in fact made by respondent prior to the institution of the case against petitioners.12 Even assuming, for argument’s sake, that no demand letter was sent by respondent, there is really no need for it because petitioners legally waived the necessity of notice or demand in the Promissory Note with Chattel Mortgage, which they voluntarily and knowingly signed in favor of respondent’s predecessor-in-interest. Said contract expressly stipulates: In case of my/our failure to pay when due and payable, any sum which I/We are obliged to pay under this note and/or any other obligation which I/We or any of us may now or in the future owe to the holder of this note or to any other party whether as principal or guarantor x x x then the entire sum outstanding under this note shall, without prior notice or demand, immediately become due and payable. (Emphasis and underscoring supplied) A provision on waiver of notice or demand has been recognized as legal and valid in Bank of the Philippine Islands v. Court of Appeals,13 wherein We held: The Civil Code in Article 1169 provides that one incurs in delay or is in default from the time the obligor demands the fulfillment of the obligation from the obligee. However, the law expressly provides that demand is not necessary under certain circumstances, and one of these circumstances is when the parties expressly waive demand. Hence, since the co-signors expressly waived demand in the promissory notes, demand was unnecessary for them to be in default.14

Further, the Court even ruled in Navarro v. Escobido15 that prior demand is not a condition precedent to an action for a writ of replevin, since there is nothing in Section 2, Rule 60 of the Rules of Court that requires the applicant to make a demand on the possessor of the property before an action for a writ of replevin could be filed. Also, petitioners’ representation that they have not received a demand letter is completely inconsequential as the mere act of sending it would suffice. Again, We look into the Promissory Note with Chattel Mortgage, which provides: All correspondence relative to this mortgage, including demand letters, summonses, subpoenas, or notifications of any judicial or extrajudicial action shall be sent to the MORTGAGOR at the address indicated on this promissory note with chattel mortgage or at the address that may hereafter be given in writing by the MORTGAGOR to the MORTGAGEE or his/its assignee. The mere act of sending any correspondence by mail or by personal delivery to the said address shall be valid and effective notice to the mortgagor for all legal purposes and the fact that any communication is not actually received by the MORTGAGOR or that it has been returned unclaimed to the MORTGAGEE or that no person was found at the address given, or that the address is fictitious or cannot be located shall not excuse or relieve the MORTGAGOR from the effects of such notice.16 (Emphasis and underscoring supplied) The Court cannot yield to petitioners’ denial in receiving respondent’s demand letter. To note, their postal address evidently remained unchanged from the time they executed the Promissory Note with Chattel Mortgage up to time the case was filed against them. Thus, the presumption that "a letter duly directed and mailed was received in the regular course of the mail"17 stands in the absence of satisfactory proof to the contrary. Petitioners cannot find succour from Ting v. Court of Appeals18 simply because it pertained to violation of Batas Pambansa Blg. 22 or the Bouncing Checks Law. As a higher quantum of proof – that is, proof beyond reasonable doubt – is required in view of the criminal nature of the case, We found insufficient the mere presentation of a copy of the demand letter allegedly sent through registered mail and its corresponding registry receipt as proof of receiving the notice of dishonor. Perusing over the records, what is clear is that petitioners did not take advantage of all the opportunities to present their evidence in the proceedings before the courts below. They miserably failed to produce the original cash deposit slips proving payment of the monthly amortizations in question. Not even a photocopy of the alleged proof of payment was appended to their Answer or shown during the trial. Neither have they demonstrated any written requests to respondent to furnish them with official receipts or a statement of account. Worse, petitioners were not able to make a formal offer of evidence considering that they have not marked any documentary evidence during the presentation of Deo Agner’s testimony.19 Jurisprudence abounds that, in civil cases, one who pleads payment has the burden of proving it; the burden rests on the defendant to prove payment, rather than on the plaintiff to prove non-payment.20 When the creditor is in possession of the document of credit, proof of non-payment is not needed for it is presumed.21 Respondent's possession of the Promissory Note with Chattel Mortgage strongly buttresses its claim

that the obligation has not been extinguished. As held in Bank of the Philippine Islands v. Spouses Royeca:22 x x x The creditor's possession of the evidence of debt is proof that the debt has not been discharged by payment. A promissory note in the hands of the creditor is a proof of indebtedness rather than proof of payment. In an action for replevin by a mortgagee, it is prima facie evidence that the promissory note has not been paid. Likewise, an uncanceled mortgage in the possession of the mortgagee gives rise to the presumption that the mortgage debt is unpaid.23 Indeed, 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.24 The debtor has the burden of showing with legal certainty that the obligation has been discharged by payment.25 Lastly, there is no violation of Article 1484 of the Civil Code and the Court’s decision in Elisco Tool Manufacturing Corporation v. Court of Appeals.26 In Elisco, petitioner's complaint contained the following prayer: WHEREFORE, plaintiffs pray that judgment be rendered as follows: ON THE FIRST CAUSE OF ACTION Ordering defendant Rolando Lantan to pay the plaintiff the sum of P39,054.86 plus legal interest from the date of demand until the whole obligation is fully paid; ON THE SECOND CAUSE OF ACTION To forthwith issue a Writ of Replevin ordering the seizure of the motor vehicle more particularly described in paragraph 3 of the Complaint, from defendant Rolando Lantan and/or defendants Rina Lantan, John Doe, Susan Doe and other person or persons in whose possession the said motor vehicle may be found, complete with accessories and equipment, and direct deliver thereof to plaintiff in accordance with law, and after due hearing to confirm said seizure and plaintiff's possession over the same; PRAYER COMMON TO ALL CAUSES OF ACTION 1. Ordering the defendant Rolando Lantan to pay the plaintiff an amount equivalent to twenty-five percent (25%) of his outstanding obligation, for and as attorney's fees; 2. Ordering defendants to pay the cost or expenses of collection, repossession, bonding fees and other incidental expenses to be proved during the trial; and 3. Ordering defendants to pay the costs of suit.

Plaintiff also prays for such further reliefs as this Honorable Court may deem just and equitable under the premises.27 The Court therein ruled: The remedies provided for in Art. 1484 are alternative, not cumulative. The exercise of one bars the exercise of the others. This limitation applies to contracts purporting to be leases of personal property with option to buy by virtue of Art. 1485. The condition that the lessor has deprived the lessee of possession or enjoyment of the thing for the purpose of applying Art. 1485 was fulfilled in this case by the filing by petitioner of the complaint for replevin to recover possession of movable property. By virtue of the writ of seizure issued by the trial court, the deputy sheriff seized the vehicle on August 6, 1986 and thereby deprived private respondents of its use. The car was not returned to private respondent until April 16, 1989, after two (2) years and eight (8) months, upon issuance by the Court of Appeals of a writ of execution. Petitioner prayed that private respondents be made to pay the sum of P39,054.86, the amount that they were supposed to pay as of May 1986, plus interest at the legal rate. At the same time, it prayed for the issuance of a writ of replevin or the delivery to it of the motor vehicle "complete with accessories and equipment." In the event the car could not be delivered to petitioner, it was prayed that private respondent Rolando Lantan be made to pay petitioner the amount of P60,000.00, the "estimated actual value" of the car, "plus accrued monthly rentals thereof with interests at the rate of fourteen percent (14%) per annum until fully paid." This prayer of course cannot be granted, even assuming that private respondents have defaulted in the payment of their obligation. This led the trial court to say that petitioner wanted to eat its cake and have it too.28 In contrast, respondent in this case prayed: (a) Before trial, and upon filing and approval of the bond, to forthwith issue a Writ of Replevin ordering the seizure of the motor vehicle above-described, complete with all its accessories and equipments, together with the Registration Certificate thereof, and direct the delivery thereof to plaintiff in accordance with law and after due hearing, to confirm the said seizure; (b) Or, in the event that manual delivery of the said motor vehicle cannot be effected to render judgment in favor of plaintiff and against defendant(s) ordering them to pay to plaintiff, jointly and severally, the sum ofP576,664.04 plus interest and/or late payment charges thereon at the rate of 72% per annum from August 20, 2002 until fully paid; (c) In either case, to order defendant(s) to pay jointly and severally: (1) the sum of P297,857.54 as attorney’s fees, liquidated damages, bonding fees and other expenses incurred in the seizure of the said motor vehicle; and

R. commenced or concluded its actual foreclosure. Settled is the principle which this Court has affirmed in a number of cases that stipulated interest rates of three percent (3%) per month and higher are excessive. regardless of maturity. SO ORDERED. which is equivalent to the remedy of "exacting fulfillment of the obligation. The trial court. 905-82. unconscionable. 2002 as the base amount. the vehicle subject matter of this case was never recovered and delivered to respondent despite the issuance of a writ of replevin. which took effect on January 1. Petitioners spouses Deo Agner and Maricon Agner are ORDERED to pay." Certainly. jointly and severally. the petition is DENIED and the Court AFFIRMS WITH MODIFICATION the April 30. 2002 until full payment and with the remaining outstanding balance of their car loan as of May 15. and exorbitant. if not against the law. effectively removed the ceiling on interest rates for both secured and unsecured loans. and (2) costs of suit.1âwphi1 All the foregoing notwithstanding. 2002 with interest at one percent ( 1 o/o) per month from May 16. Plaintiff further prays for such other relief as this Honorable Court may deem just and equitable in the premises. there is no double recovery or unjust enrichment30 to speak of. 2002 until fully paid.(2) the costs of suit. it cannot be said that petitioners were deprived of the use and enjoyment of the mortgaged vehicle or that respondent pursued. ( 1) the remaining outstanding balance of their auto loan obligation as of May 15. . 1983.33 WHEREFORE. Inc. 2007 Decision and May 19. 86021.31 While Central Bank Circular No. to be reckoned from May 16. rightfully granted the alternative prayer for sum of money. respondent BPI Family Savings Bank.29 Compared with Elisco. therefore. it is as if there was no express contract on said interest rate. nothing in the said circular could possibly be read as granting carte blanche authority to lenders to raise interest rates to levels which would either enslave their borrowers or lead to a hemorrhaging of their assets.32 Since the stipulation on the interest rate is void for being contrary to morals. We are of the opinion that the interest of 6% per month should be equitably reduced to one percent (1%) per month or twelve percent (12%) per annum. thus. 2008 Resolution of the Court of Appeals in CA-G. the interest rate may be reduced as reason and equity demand. iniquitous. CV No. As there was no seizure that transpired.

petitioner Aurora. 2759-98. 2005 Decision2 of the Court of Appeals (CA) in CA-G. In their Complaint.: In a contract to sell. T-253348 (subject land) in the name of petitioner Aurora. A -buyer who covertly usurps the seller's ownership of the property prior to the full payment of the price is in breach of the contract and the seller is entitled to rescission because the breach is substantial and fundamental as it defeats the very object of the parties in entering into the contract to sell. and the February 10.000. 1997. for these fraudulent . The case was raffled to Branch 9 and docketed as Civil Case No. 1998.000.00 although said property had a market value of more than P2. Petitioners. 2013 SPOUSES DELFIN O. Reynalda sold the subject land to her daughter. that the subject sale was done without the knowledge and consent of petitioners. the seller retains ownership of the property until the buyer has paid the price in full. J.171692 June 3. legal representative. Rowena Gay T. and recovery of ownership and possession of land with the RTC of Malaybalay City. that they are natural born Filipino citizens but petitioner Delfin acquired American citizenship while his wife.000. The Petition for Review on Certiorari1 assails the May 19. through a deed of sale10 for an unconscionable amount of P95. LOPEZ and ROWENA GAY T. No. petitioners filed a Complaint7 for declaration of nullity ab initio of sale. DECISION DEL CASTILLO. and that. Respondents. that petitioner Aurora is the sister of Reynalda Visitacion (Reynalda). 2006 Resolution4 denying petitioner-spouses Delfin O.6 Factual Antecedents On March 23. GRACE JULIE ANN TUMIBAY MANUEL.9 that on July 23. Tumibay and Aurora5 T. Malaybalay. 79029. 2759-98. Tumibay’s Motion for Reconsideration.00. SPOUSES MELVIN A. TUMIBAY-deceased. petitioners alleged that they are the owners of a parcel of land located in Sumpong. Visitacion Lopez (respondent Rowena).Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G. which reversed the January 6. CV No. remained a Filipino citizen.R. Branch 9 in Civil Case No.R. TUMIBAY and AURORA T. vs. 2003 Decision3 of the Regional Trial Court (RTC) of Malaybalay City. VISITACION LOPEZ. Bukidnon covered by Transfer Certificate of Title (TCT) No.

Petitioners prayed that (1) the deed of sale dated July 23. 1998.000. petitioners filed an Answer to Counterclaim. respondent Rowena paid the monthly installments thereon as evidenced by money orders. spouses Melvin and Rowena Gay Lopez. (2) the subject land be reconveyed to petitioners.00 at the present rate of exchange less the expenses to be incurred for the transfer of the property in question under the name of the petitioners. respondent Rowena. Ruling of the Regional Trial Court On January 6. (3) Ordering respondents. that. and that Reynalda.00 to be paid on installment. respondent Rowena paid in cash to petitioners the sum of $1. which sale is null and void because an agent cannot purchase for herself the property subject of the agency. viz: WHEREFORE.13 Petitioners admitted the existence of the SPA but claimed that Reynalda violated the terms thereof when she (Reynalda) sold the subject land without seeking the approval of petitioners as to the selling price. Visitacion-Lopez and to issue a new TCT in the name of the petitioners. On May 25. a deed of sale was executed and the corresponding title was issued in favor of respondent Rowena. respondents should be held liable for damages.00. to return the said amount of $12. in furtherance of the agreement. petitioners executed a special power of attorney (SPA)12 in favor of Reynalda granting the latter the power to offer for sale the subject land. as follows. Respondents averred that on December 12. that on January 25. 2003.000. (2) Ordering the Register of Deeds of Bukidnon to cancel TCT No. respondents filed their Answer11 with counterclaim. (1) Ordering the petitioners. or if said respondents should refuse to do so or are unable to do so.000. that from 1995 to 1997.acts. the Clerk of Court of the RTC and ex-officio Provincial Sheriff to execute such Deed of Reconveyance. and (3) respondents be ordered to pay damages. and that petitioners should be held liable for damages for filing the subject Complaint in bad faith. Respondents prayed that the Complaint be dismissed and that petitioners be ordered to pay damages. to execute a Deed of Reconveyance in favor of the petitioners. jointly and severally. executed the deed of sale in her favor but placed it in the name of her daughter. . respondent Rowena and petitioners agreed that the former would buy the subject land for the price of P800. that the subject sale was done with the knowledge and consent of the petitioners as evidenced by the receipt of payment by petitioners. that sometime in 1994. Petitioners also claimed that the monthly payments from 1995 to 1997 were mere deposits as requested by respondent Rowena so that she (Rowena) would not spend the same pending their agreement as to the purchase price. 1997 be declared void ab initio. T-62674 in the name of the respondent Rowena Gay T. 1998. 1995. Decision is hereby rendered. the RTC rendered a Decision in favor of petitioners. 1990. acting with evident bad faith. On May 19.

SO ORDERED. jointly and severally. From this Decision. of the Civil Code which prohibits the agent from acquiring the property subject of the agency unless the consent of the principal has been given. .000. be ordered to reimburse the same without interest.00. as agent. the trial court clarified that the reimbursement of $12. the CA rendered the assailed Decision reversing the judgment of the trial court. paragraph 2. (2) although there is no direct evidence of petitioners’ approval of the selling price of the subject land. through fraud and with bad faith. connived with her daughter. Ruling of the Court of Appeals On May 19. the appellate court ruled that: (1) the SPA sufficiently conferred on Reynalda the authority to sell the subject land.(4) No x x x damages are awarded. Petitioners filed a partial motion for reconsideration15 praying for the award of attorney’s fees. The trial court further ruled that petitioners are not entirely free from liability because they received from respondent Rowena deposits totaling $12. thus. to sell the subject land to the latter. without first seeking the approval of petitioners as to the selling price thereof. to pay the legal rate of interests [sic] at 12% per annum until fully paid. premises considered.14 In ruling in favor of petitioners.17 In reversing the trial court’s Decision. viz: WHEREFORE. respondent Rowena. respondents appealed to the CA.000. (3) the SPA does not sufficiently confer on Reynalda the authority to sell the subject land. the sale is null and void and the subject land should be reconveyed to petitioners.00 in favor of respondents was without interest because there was also no award of rental income in favor of petitioners. In its January 14. must pay the costs of this suit. Accordingly. 2005. The trial court held that Reynalda. 2003 Order16 denying the aforesaid motion.00) to the petitioners effective within 30 days from receipt of this Decision and in case of delay. respondent Rowena. The respective parties must bear their own expenses except that respondents. (5) the sale contravenes Article 1491. Thus. Under the principle of unjust enrichment. the appealed Decision of the Court a quo is hereby REVERSED and SET ASIDE. Both parties are deemed mutually compensated and must bear their own expenses. title to the subject property shall remain in the name of the Appellant ROWENA GAY VISITACION-LOPEZ. the trial court held: (1) the SPA merely authorized Reynalda to offer for sale the subject land for a price subject to the approval of the petitioners. (4) Reynalda.000. (2) Reynalda violated the terms of the SPA when she sold the subject land to her daughter. and. acted outside the scope of her authority under the SPA. SO ORDERED. petitioners should. The latter and her spouse MELVIN LOPEZ are directed to pay the balance of Four Hundred Eighty Eight Thousand Pesos (P488.

00 to petitioners and pegging the exchange rate at that time at P26. she did not secure the .18 Petitioners’ Arguments Petitioners argue that the appellate court went beyond the issues of this case when it ruled that there was a contract of sale between respondent Rowena and petitioner Aurora because the issues before the trial court were limited to the validity of the deed of sale dated July 23. The money.petitioner Aurora’s acts of receiving two money orders and several dollar checks from respondent Rowena over the span of three years amount to the ratification of any defect in the authority of Reynalda under the SPA. (6) the selling price of P800. 1997 for being executed by Reynalda beyond the scope of her authority under the SPA.000.000. given to petitioners from 1995 to 1997 were mere deposits until the parties could agree to the purchase price. (3) petitioners are estopped from repudiating the sale after they had received the deposits totaling $12. the appellate court ruled that P312. Whether the CA erred in not declaring the sale void on grounds of public policy. Reynalda acted beyond the scope of her authority under the SPA because she was merely authorized to look for prospective buyers of the subject land. Further. Whether the CA erred in adopting the testimony of respondent Rowena as to the P800. V. Even assuming that she had the power to sell the subject land under the SPA. Hence. IV. Whether under the SPA Reynalda had the power to sell the subject land. the existence of the alleged contract of sale was not proven because the parties failed to agree on the purchase price as stated by petitioner Aurora in her testimony.00 selling price of the subject land.00 selling price was already received by petitioners. Issues Petitioners raise the following issues for our resolution: I. respondents are only liable for the balance ofP488. II.000. Whether the CA erred in resolving the issue in the case at bar.000. in cash and checks.00 per dollar. and. Moreover. this Petition.00 for the subject land is deemed reasonable based on the testimony of respondent Rowena as this was the selling price agreed upon by her and petitioner Delfin.000. III.000.00 of the P800. Whether the actuations of petitioner Aurora in receiving money from respondent Rowena amounted to the ratification of the breach in the exercise of the SPA. Considering that respondent Rowena proved that she remitted a total of $12.000. Thus. (5) petitioners impliedly ratified the subject SPA and contract of sale as well as its effects. (4) the sale is not contrary to public policy because there is no rule or law which prohibits the sale of property subject of the agency between the agent and his children unless it would be in fraud of creditors which is not the case here.00.00.

executed an SPA in favor of Reynalda. On January 25. In the aforesaid deed. respondent Rowena. petitioners question the determination by the appellate court that the fair market value of the subject land is P800. They further claim that the sale was void because it was not only simulated but violates Article 1491 of the Civil Code which prohibits the agent from acquiring the property subject of the agency. 1997 is valid.000.approval as to the price from petitioners before executing the subject deed of sale. petitioners and respondent Rowena agreed to enter into an oral contract to sell over the subject land for the price of P800.000. Sometime in 1997.000. On December 12. this case falls under one of the recognized exceptions thereto because the factual findings of the trial court and appellate court are conflicting. after having paid a total of $10. offer for sale the subject land provided that the purchase price thereof should be approved by the former. hence. Sometime in 1994.19 Our review of the records leads us to conclude that the following are the relevant factual antecedents of this case. the appellate court properly ruled on the former. 1997. respondent Rowena called her mother. Furthermore.20 to thesubject land was issued in the name of respondent Rowena. the sale is null and void. hence.000. i. they reiterate the findings of the appellate court that the receipt of monthly installments constitutes an implied ratification of any defect in the SPA and deed of sale dated July 23. petitioners.e. claiming that she had already bought the subject land from petitioners. as a dummy to acquire the subject land. while respondent Rowena appeared as buyer.00 for lack of any factual and legal basis. TCT No. 1995. among others.00 to petitioner Aurora which was followed by 22 intermittent monthly installments of $500. Reynalda merely used her daughter. 1990. respondent Rowena paid the first monthly installment of $1. a new title.00.. Petitioners also contend that there was no ratification of the subject sale through petitioners’ acceptance of the monthly checks from respondent Rowena because the sale occurred subsequent to the receipt of the aforesaid checks.00 to be paid in 10 years through monthly installments. Respondents’ Arguments Respondents counter that the issue as to whether there was a perfected contract of sale between petitioners and respondent Rowena is inextricably related to the issue of whether the deed of sale dated July 23. Using the aforesaid SPA. 62674. as principals and sellers. T-25334 in the name of petitioner Aurora. As a general rule. Our Ruling The Petition is meritorious.00 spanning almost three years. Here. Reynalda. Reynalda then transferred the title to the subject land in respondent Rowena’s name through a deed of sale dated July 23. .00 as consideration for the subject land. as seller. Finally. we do not disturb the factual findings of the appellate court. 1997 without the knowledge and consent of petitioners. as agent.000. They emphasize that petitioners received a total of $12. to. Reynalda appeared and signed as attorney-in-fact of petitioner Aurora. Petitioners were the owners of the subject land covered by TCT No. After which. However.

00 500. 1996 June 30.00 500.00 500. 1996 500. 1995 May 29.00 500.000.00 500.00 500. 1995 February 21. Petitioners deny that they agreed to sell the subject land to respondent Rowena for the price of P800.00 payable in 10 years through monthly installments. the date of the last monthly installment). 1995 June 30. 1996 December 31. 1995 March 27.00 500. 1996 August 31. They claim that the payments received from respondent Rowena were for safekeeping purposes only pending the final agreement as to the purchase price of the subject land.00 500. 1996 July 31.00 September 30.00 500.000.We explain these factual findings and the consequences thereof below. the payments already totaled $12.000.00.00 500.e. 1996 January 31.00 500. Petitioners do not deny that they received 23 monthly installments over the span of almost three years.00 500. 1995 April 25. First. 1997 March 31. 1996 October 29. 1995 June 1. 1997 Amount Paid (in dollars) 1.0023 500. 1995 July 31. the payment of monthly installments was duly established by the evidence on record consisting of money orders21 and checks22 payable to petitioner Aurora.00 . As of November 30.. 1997 February 28.00 500. Petitioners and respondent Rowena entered into a contract to sell over the subject land. We are inclined to give credence to the claim of the respondents for the following reasons. 1997 (i. to wit: Date January 25.00 500.

1995 was a mere deposit until the purchase price of the subject land would have been finally agreed upon by both parties. 1997 500.00 12.30 . to wit: (1) the title to the subject land was not immediately transferred. a contractual agreement between the parties for the purchase of the subject land and that this agreement partook of an oral contract to sell for the sum ofP800.000. 1997 500. because she believed that she had substantially paid the purchase price thereof. after receiving this initial sum of $1. and. while there was no written agreement evincing the intention of the parties to enter into a contract to sell. its existence and partial execution were sufficiently established by. inclined to rule that there was. 1997 Total 500."27 In the case at bar. respondent Rowena admitted that she had the title to the subject land transferred in her name only later on or on July 23.00.28 (2) after this initial payment.24 However. through a deed of sale. 1997 July 19. Third. No attempt was made on the part of petitioners to return these amounts and it is fair to assume that petitioners benefited therefrom.00."25 In a contract to sell. 1997 August 31.00.000. indeed. in her testimony. We are. "ownership is retained by the seller and is not to pass until the full payment of the price x x x.00. she thereafter accepted from respondent Rowena 22 intermittent monthly installments in the amount of $500. petitioner Aurora claimed that the $1.000. through a formal deed of conveyance. petitioner Aurora failed to explain why.00 in cash that she received from respondent Rowena on January 25. thus. in the name of respondent Rowena prior to or at the time of the first payment of $1.May 31.00 by respondent Rowena to petitioner Aurora on January 25. 1995."26 It is "commonly entered into so as to protect the seller against a buyer who intends to buy the property in installments by withholding ownership over the property until the buyer effects full payment therefor. it strains credulity that respondent Rowena would make such monthly installments for a substantial amount of money and for a long period of time had there been no agreement between the parties as to the purchase price of the subject land.00 November 30.00 500.00 500.00 Second.000. while expressly reserving the ownership of the subject property despite delivery thereof to the prospective buyer.00 500.00 September 30. A contract to sell has been defined as "a bilateral contract whereby the prospective seller.29 and that she was entitled thereto as a form of security for the installments she had already paid.000. and may be reasonably inferred from the actuations of the parties. 1997. that is. full payment of the purchase price. 1997 October 31. petitioners received 22 intermittent monthly installments from respondent Rowena in the sum of $500. (3) in her testimony. binds himself to sell the said property exclusively to the prospective buyer upon fulfillment of the condition agreed upon.

58%38 of theP800.000. we find that respondent Rowena was in breach thereof because. 1996 September 30.00 12.00 500.00 500. 1997 March 31.00 500.50 or 32. In arriving at this conclusion.557.00 500. 1995 February 21. 1995 March 27. 1997 July 19. 1996 October 29.114. 1995 May 29.Respondent Rowena was in breach of the contract to sell.50 13.166.8040 25.770.1880 26.983.287.2280 26. 1996 July 31. 1997 May 31.00 500. Although we rule that there was a contract to sell over the subject land between petitioners and respondent Rowena.5750 25.101.187.00 500.00 14.101.50 13.00 500.128.00 260.50 13.374036 28.9670 26. 1995 July 31.00 500. 1997 or prior to the execution of the deed of sale dated July 23. as supported by the evidence on record.00 500.00 500.792. 1996 January 31. the total amount of monthly installments paid by respondent Rowena to petitioners was only P260.3670 26.5850 26.50 Thus.00 13.00 500.172.2570 26.50 13.626.2830 26.00 purchase price. to wit: Date January 25. the full price of the subject land was yet to be paid.00 Exchange Rate (peso per dollar) 24.50 13. 1996 June 30.183.00 13. as published by the Bangko Sentral ng Pilipinas. 1995 June 1.000.288035 26.00 500.7700 25. 1997 Amount Paid (in dollars) 1. 1997.0270 25.902. as of July 19.50 12. 1997. viz: . at the time the aforesaid deed of sale was executed on July 23.00 13.3330 26.50 12.144. we take judicial notice31 of the prevailing exchange rates at the time.787.1140 25. 1996 December 31.32 and multiply the same with the monthly installments respondent Rowena paid to petitioners.50 13.3440 26. 1995 June 30.00 500.00 12.00 12. 1996 August 31.574037 Total Peso Equivalent 24.00 500.00 500. 1997 February 28. That the full price was yet to be paid at the time of the subject transfer of title was admitted by respondent Rowena on cross-examination.202034 26.00 13.203033 26.00 500.00 500.013.141.50 13.00 500.626. 1995 April 25.094.00 13.

My mother is equipped with the SPA to transfer the lot to me only for security purposes but actually there is no full payment.000. Neither can we accept her justification that the premature transfer of title was necessary as a security for the installments she had already paid absent proof that petitioners agreed to this new arrangement.Since notwithstanding the fact this eight hundred thousand which you have agreed is not fully paid why did your mother finalize the deed of sale? A . BARROSO: Q .58% thereof.Why is this check (in the amount of $1. Significantly. In particular. her own evidence clearly showed that she had.00 dollar to him (referring to petitioner Delfin)? A .Now did you continue x x x paying the $500. However. Now based on the dollar rate.Yes. [sic] ATTY. Reynalda. Verily.Now having stated substantially paid. xxxx Q . paid only 32. OKIT: Q .39 (Emphasis supplied) Respondent Rowena tried to justify the premature transfer of title by stating that she had substantially paid the full amount of the purchase price and that this was necessary as a security for the installments she had already paid.This is the check I paid to her (referring to petitioner Aurora) which is in cash. respondent Rowena’s narration of the events leading to the transfer of title showed that she and her mother. You now admit that x x x you agreed to buy the lot at eight hundred thousand. the evidence on record indicates that the premature transfer of title in the name of respondent Rowena was done without the knowledge and consent of petitioners. viz: COURT: Q. never sought the consent of petitioners prior to said transfer of title.00) in your possession now? A. your total payment did not reach x x x eight hundred thousand pesos? Is that correct? [sic] A . by that time.ATTY. what did you do with the land subject of this case? [sic] . she failed to prove that petitioners agreed to amend or novate the contract to sell in order to allow her to acquire title over the subject land even if she had not paid the price in full.Yes. to which the Plaintiff x x x agreed.Let us make this clear. Q .

[sic] Q . 1191. The power to rescind obligations is implied in reciprocal ones. the tenor of her testimony indicates that respondent Rowena made a unilateral determination that she had substantially paid the purchase price and that she is entitled to the transfer of title as a form of security for the installments she had already paid. The SPA could not have amended or novated the contract to sell to allow respondent Rowena to acquire the title over the subject land despite non-payment of the price in full for the reason that the SPA was executed four years prior to the contract to sell.After two years my mother called me if how much I have paid the land and being equipped with SPA. reasons.A . x x x As a general rule.Yes."41 In the case at bar. He may also seek rescission even after he has chosen fulfillment. In fine. The contract to sell is rescissible. with the payment of damages in either case. constitutes a substantial and fundamental breach of the contract to sell. the main object or purpose of a seller in entering into a contract to sell is to protect himself against a buyer who intends to buy the property in installments by withholding ownership over the property until the buyer . in case one of the obligors should not comply with what is incumbent upon him. The court shall decree the rescission claimed. "rescission will not be permitted for a slight or casual breach of the contract. The terms of the SPA are clear. xxxx Q . we find that respondent Rowena’s act of transferring the title to the subject land in her name.Then what transpired next? A . if the latter should become impossible. As previously noted. so she transferred the land to me. [sic]40 (Emphases supplied) Respondent Rowena’s reliance on the SPA as the authority or consent to effect the premature transfer of title in her name is plainly misplaced. without the knowledge and consent of petitioners and despite non-payment of the full price thereof. The injured party may choose between fulfillment and the rescission of the obligation. as unjustified.And you called your mother? A . Article 1191 of the Civil Code provides: Art. unless there be just cause authorizing the fixing of a period. we previously noted.I called my mother who has equipped with SPA to my Uncle that I have already bought the land. It merely authorized Reynalda to sell the subject land at a price approved by petitioners. but only for such breaches as are substantial and fundamental as to defeat the object of the parties in making the agreement.

are liable for damages.58% thereof) when she had the title to the subject land transferred to her name. thus. under Article 2208(2)46 of the Civil Code. Those who in the performance of their obligations are guilty of fraud. our review of the records leads us to conclude that respondent Rowena is entitled to the reimbursement of the same with legal interest. in the name of her mother and executed four years prior to the contract to sell. Where fraud and bad faith have been established. and (2) she orchestrated the aforesaid transfer of title without the knowledge and consent of petitioners. commits a substantial and fundamental breach which entitles the seller to rescission of the contract. 1170. rule that petitioners are entitled to the rescission of the subject contract to sell. We. the seller’s obligation to convey and the buyer’s right toconveyance of the property arise only upon full payment of the price. Thus. the award of moral damages is proper.00 and P50. Here.42 As a result.45 Further. respondent Rowena took advantage of the SPA.effects full payment therefor. Put simply. thus. Reynalda. should continue with the contract to sell even after the discovery of the aforesaid breach committed by respondent Rowena. find respondent Rowena liable for moral damages and attorney’s fees which we fix at P100.000. as buyer. Article 1170 of the Civil Code provides: Art.000. Although respondent Rowena was clearly unjustified in prematurely and covertly transferring the title to the subject land in her name.43 Indeed.44 In the case at bar. the award of attorney’s fees is proper where the plaintiff is compelled to litigate with third persons or incur expenses to protect his interest because of the defendant’s act or omission.00. incompatible with good faith. Fraud or malice (dolo) has been defined as a "conscious and intentional design to evade the normal fulfillment of existing obligations" and is. Petitioners are entitled to moral damages and attorney’s fees while respondent Rowena is entitled to the reimbursement of the monthly installments with legal interest. we deplore petitioners’ lack of candor in prosecuting their claims before the trial . and those who in any manner contravene the tenor thereof. respectively. a buyer who willfully contravenes this fundamental object or purpose of the contract. as sellers. considering that these acts betrayed in no small measure the trust reposed by petitioners in her and her mother.47 Anent the monthly installments respondent Rowena paid to petitioners. We. respondent Rowena’s aforesaid acts caused petitioners to incur expenses in litigating their just claims. by covertly transferring the ownership of the property in his name at a time when the full purchase price has yet to be paid. to effect the transfer of title to the subject land in her (Rowena’s) name without the knowledge and consent of petitioners and despite non-payment of the full price. or delay. thus. it would be highly iniquitous for us to rule that petitioners. we find that respondent Rowena was guilty of fraud in the performance of her obligation under the subject contract to sell because (1) she knew that she had not yet paid the full price (having paid only 32. Her own testimony and documentary evidence established this fact. negligence.

2020 26. 1996 December 31.1880 26. no evidence was presented to prove that respondent Rowena occupied the subject land or benefited from the use thereof upon commencement of the contract to sell which would have justified the setting off of rental income against the monthly installments paid by respondent Rowena to petitioners.101.902. petitioners made no mention of the fact that they had entered into a contract to sell with respondent Rowena and that they had received 23 monthly installments from the latter.557. 1996 September 30.00 500.50 13.00 13.50 13.141.00 500. 1996 October 29.00 500.00 500.9670 26.00 13.770.144.792. The total amount to be reimbursed by petitioners to respondent Rowena is computed as follows: Date January 25.2830 26. in their Complaint.2570 26. 1996 August 31.00 13.00 500. 1996 June 30.00 500.101.3330 26.00 12.00 12.00 13.0270 25.094.187.7700 25. It was only later on.5850 26. the sums paid by respondent Rowena as monthly installments to petitioners should.8040 25.00 .2880 26.287.00 500. 1997 Amount Paid (in dollars) 1.50 12. 1995 April 25.00 500. Further. be returned to her with legal interest.court and intent to evade recognition of the monthly installments that they received from respondent Rowena. 1995 June 30. 1995 February 21.50 12.1140 25.00 500.172.3670 26.00 500.00 12.00 500. In view of the foregoing. 1995 March 27. 1997 March 31.5750 25.5740 Peso Equivalent 24. 1997 May 31.00 500.00 500. that this was brought to light to which petitioners readily admitted. 1997 February 28. 1995 June 1.2280 26.3440 26.00 500.00 Exchange Rate (peso per dollar) 24.00 500.00 500.983.50 13. 1995 May 29. The records indicate that.000.183.114. thus.3740 28.00 500.00 500.50 13.50 13.50 13.787.00 13.2030 26.00 14.166. The Complaint merely alleged that the subject sale was done without the knowledge and consent of petitioners.013. 1997 July 19. 1996 July 31. 1996 January 31. 1995 July 31. when respondent Rowena presented the proof of payment of the monthly installments in her Answer to the Complaint.128.50 13.

New Jersey.082.00 17. the SPA gave Reynalda the power and duty to. 1997. petitioners.50 Petitioners are.469. 1997 which was used to effect the aforesaid transfer of ownership. 07066 name. is void. v. among others.50 17. thus. we set the interest rate at 6% per annum computed from the time of the filing of the Answer48 to the Complaint on May 19. The sale of the subject land.50 16.August 31. (2) seek the approval of petitioners as to the selling price thereof. widow. 1997 November 30. of legal age and presently residing at 36 Armstrong Drive. Clark.327. Inc.51.936. 1997 September 30.00 30.00 500.8730 34. executed an SPA in favor of Reynalda. constitute and appoint REYNALDA VISITACION.9380 34. Barrio of Bantaunon. Towns of Maramag. xxxx To sign all papers and documents on our behalf in a contract of sale x x x. AURORA TUMIBAY and DELFIN TUMIBAY. To offer for sale said properties.00 Since this amount is neither a loan nor forbearance of money. Court of Appeals.1650 33. As can be seen. (1) offer for sale the subject land to prospective buyers.50 327.442. to be our true and lawful Attorney-in-fact. ordered to pay respondent Rowena the sum of P327. the selling price of which will be subject to our approval.442. Having ruled that respondent Rowena was in substantial breach of the contract to sell because she had the title to the subject land transferred in her name without the knowledge and consent of petitioners and despite lack of full payment of the purchase price. Bukidnon. 1997 500. Philippines. of legal age and residing at Don Carlos. Paradise. as principals and sellers. Town of Quezon.00 500. It will be recalled that on December 12. 1990. place and stead and for our use and benefit to do and perform the following acts and deed: To administer our real property located in the Province of Bikidnon.00 with an interest of 6% per annum computed from May 19. we now rule on the validity of the deed of sale dated July 23. effected through the deed of sale dated July 23.00 500. 1997 October 31. Town of Malaybalay. 199849 until finality of judgement and thereafter at 12% per annum until fully paid in accordance with our ruling in Eastern Shipping Lines. The SPA stated in part: That we spouses. for us and in our name. Maramag and Barrio of Kiburiao. and (3) sign the contract of sale on behalf of petitioners upon .6550 Total 15. 1998 until finality of judgment and thereafter of 12% per annum until fully paid. as agent.

52 Reynalda. It should be noted that.000.000. 1898. ruled that whatever defect attended the sale of the subject land should be deemed impliedly ratified by petitioners’ acceptance of the monthly installments paid by respondent Rowena. This seems to be the line of reasoning adopted by the appellate court in upholding the validity of the subject sale.. Article 1898 of the Civil Code provides: Art. when Reynalda. the principal’s ratification of the acts of the agent. The appellate court conceded that there was no evidence that respondents sought the approval of petitioners for the subject sale but it. exceeding the scope of his authority. had paid only 32. as previously discussed. That petitioners continued to receive four monthly installments even after the premature titling of the subject land in the name of respondent Rowena.locating a buyer willing and able to purchase the subject land at the price approved by petitioners. 1997. would forego the reservation or retention of the ownership over the subject land. as sellers. there would have been no obstacle to its use by Reynalda had the ensuing sale been consummated according to its terms.262.e. therefore. under Article 1898 of the Civil Code. On the contrary. on behalf of petitioners. September 30.00. Further. and the principal does not ratify the contract. . If the agent contracts in the name of the principal. at a price of P95. the agreed price of P800. 1997) respondent Rowena paid to petitioners which the latter presumably received and accepted even after the execution of the deed of sale dated July 23. it shall be void if the party with whom the agent contracted is aware of the limits of the powers granted by the principal. as buyer. the evidence on record established that the subject sale was done without petitioners’ knowledge and consent which would explain why receipt or acceptance by petitioners of the aforementioned four monthly installments still occurred. For her part. respondent Rowena cannot deny that she was aware of the limits of Reynalda’s power under the SPA because she (Rowena) was the one who testified that the agreed price for the subject land was P800. nonetheless. through the deed of sale dated July 23. establish that petitioners ratified such sale.000. However. In this case. may cure the defect in the contract entered into between the agent and a third person. August 31. 1997.00 (which may be treated as the approved price) was not yet fully paid because respondent Rowena at the time had paid only P260.50. 1997. by itself. Though not clearly stated in its Decision. As stated earlier. done beyond the scope of the latter’s authority. did not. it runs contrary to common human experience and reason that petitioners. acted beyond the scope of her authority because she signed the subject deed of sale.58% of the purchase price. October 31. the agent is liable if he undertook to secure the principal’s ratification. especially so in this case where respondent Rowena. however. the fact that petitioners continued to receive the aforesaid monthly installments tended to establish that they had yet to discover the covert transfer of title in the name of respondent Rowena.00 which was not approved by the latter. We disagree. signed the subject deed of sale dated July 23. and November 30. as attorney-in-fact of petitioner Aurora. which was intended to guarantee the full payment of the price under the contract to sell. the appellate court seemed to rely on the four monthly installments (i. Although the SPA was executed four years prior to the contract to sell.

Under Article 1898 of the Civil Code. 79029 are ANNULLED and SET ASIDE. and (3) petitioners did not ratify. 1997 in favor of respondent Rowena. acted beyond the scope of her authority under the SPA when she executed the deed of sale dated July 23. and respondent Rowena. therefore. In case petitioners fail to pay the amount due upon finality of this Decision. CV No. between petitioner Aurora. as agent. which was done without their knowledge and consent. T-62674. The contract to sell over the subject land. and respondent Rowena is declared void. The deed of sale dated July 23. they shall pay legal interest thereon at the rate of 12% per annum until fully paid. 2. We. and that the subsequent discovery of the aforesaid fraudulent sale led them to promptly file this case with the courts to be more credible and in accord with the evidence on record. it would be unusual for the seller to consent to the transfer of ownership of the property to the buyer prior to the full payment of the purchase price because the reservation of the ownership in the seller is precisely intended to protect the seller from the buyer. 5. Petitioners are ordered to pay respondent Rowena the sum of P327. between petitioners.1âwphi1 3.000.R.000. The May 19. To rule otherwise would be to reward respondent Rowena for the fraud that she committed on petitioners. represented by Reynalda as her attorney-infact. Based on the foregoing. Branch 9 in Civil Case No. (2) respondent Rowena was aware of the limits of the authority of Reynalda under the SPA. T-25334.442. WHEREFORE. without the knowledge and consent of petitioners. covered by TCT No. T-25334 in the name of petitioner Aurora.00 as attorney’s fees. as sellers. 2005 Decision and February 10. Respondent Rowena is ordered to pay petitioners the sum of P100. 1998 until finality of this Decision. 1997 over the subject land. and conveyed the subject land to respondent Rowena at a price not approved by petitioners. as buyer. 2003 Decision of the Regional Trial Court of Malaybalay City. SO ORDERED. 4. 2759-98 is REINSTATED and MODIFIED to read as follows: 1. as principals and sellers.00 as moral damages andP50. thus. entitled to the reconveyance of the subject land. 2006 Resolution of the Court of Appeals in CA-G. impliedly or expressly. The January 6. the acts of Reynalda. the Petition is GRANTED. find that petitioners’ claim that they did not ratify the subject sale. is declared rescinded. we rule that (1) Reynalda.In a contract to sell. T-62674 in the name of respondent Rowena and to reinstate TCT No. covered by TCT No. The Register of Deeds of Malaybalay City is ordered to cancel TCT No. . the sale is void and petitioners are. No costs.00 with legal interest of 6% per annum from May 19. as buyer.

65993. The antecedent facts are as follows: On December 11. MALLARI.a.a. petitioners spouses Florentino and Aurea Mallari (petitioners) obtained again from respondent bank another loan of P1.a. 1990. 2011 of the Court of Appeals (CA) in CA-G. assailing the Decision1 dated June 17. MALLARI and AUREA V. sent a demand letter to the former for them to pay their obligations.991. BD 84-055. attorney's fees equivalent to 15% of the total amount due but not less than P200. J. but not less than P200.: Before us is a Petition for Review on Certiorari under Rule 45..a. 1989. 2013 SPOUSES FLORENTINO T. 1984. vs. the latter.82 for PN No. thus. PRUDENTIAL BANK (now BANK OF THE PHILIPPINE ISLANDS). CV No. a penalty and collection charges of 12% p. petitioner Florentino T. a loan in the amount of P300. Petitioners executed a Deed of Real Estate Mortgage6 in favor of respondent bank covering petitioners' property under Transfer Certificate of Title (TCT) No. Petitioners.218.000. 1985.a.00 as evidenced by Promissory Note (PN) No.00 and. of the total amount due. amounted to P571. 2010 and the Resolution2 dated July 20. BD 84-055 and P2.). 1985. DECISION PERALTA. through its lawyer. Petitioners failed to settle their loan obligations with respondent bank.00. of the total amount due. attorney's fees equivalent to 15% p. the loan was subject to an interest rate of 21% per annum (p. The loan had a maturity date of January 10. On December 22. No. Mallari (Florentino) obtained from respondent Prudential Bank-Tarlac Branch (respondent bank). Respondent. in case of default.00. and penalty and collection charges of 12% p. BDS 606-895 with a maturity date of March 22.54 for PN No.R. 197861 June 5.Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G. T-215175 of the Register of Deeds of Tarlac to answer for the said loan.294.7 million as evidenced by PN No.000. . 1992. but was renewed up to February 17. They stipulated that the loan will bear 23% interest p. BDS 606-89.R. Petitioner Florentino executed a Deed of Assignment4 wherein he authorized the respondent bank to pay his loan with his time deposit with the latter in the amount ofP300.3 Under the promissory note. which when computed up to January 31.

000. However.000.18. thus.836. and that the extrajudicial foreclosure was sought for the satisfaction of the second loan in the amount of P1.043. that: (1) the P300. 1989.00 loan covered by another PN No. the loan of P300. respondent bank filed a Motion to Dismiss Complaint11 for failure to prosecute action for unreasonable length of time to which petitioners filed their Opposition.000. and (3) they realized that there were onerous terms and conditions imposed by respondent bank when it tried to unilaterally increase the charges and interest over and above those stipulated.7 million loan obligation for purposes of applying the proceeds of the auction sale. Subsequently. In an Order8 dated November 10.000. a Certificate of Sale was issued to respondent bank being the highest bidder in the amount ofP3. BDS 606-89 and the real estate mortgage. among others.00. 1992.700. which were used in computing for interest charges. while the P1. 1993.00 loan. the RTC denied the Application for a Writ of Preliminary Injunction. injunction.171.On February 25.500. respondent bank's Assistant Manager sent petitioners two (2) separate Statements of Account as of April 23. (2) as early as January 1986.000. in petitioners' Supplemental Motion for Issuance of a Restraining Order and/or Preliminary Injunction to enjoin respondent bank and the Provincial Sheriff from effecting or conducting the auction sale. respondent bank filed with the Regional Trial Court (RTC) of Tarlac. (2) respondent bank still added theP300. because the time deposit with the same amount under Certificate of Time Deposit No. 1998. the RTC reversed itself and issued the restraining order in its Order9 dated January 14.00 secured by such mortgage. 1993. petitioners' time deposit was made to apply for the payment of interest of their P300. deeds.00 loan to the P1. Petitioners asked the court to restrain respondent bank from proceeding with the scheduled foreclosure sale. which the RTC granted in its Order10 dated March 9.000. 1992. temporary restraining order and damages claiming. the auction sale was set by the Provincial Sheriff on April 23. 1992. petitioners filed a complaint for annulment of mortgage.700. On April 20. 1993.12 On November 19. On July 7. and (3) the statement of account as of April 10.7 On April 10. Respondent bank filed its Answer with counterclaim arguing that: (1) the interest rates were clearly provided in the promissory notes. Respondent bank then proceeded with the extrajudicial foreclosure of the mortgaged property.54. 1992 provided for a computation of interest and penalty charges only from May 26. a petition for the extrajudicial foreclosure of petitioners' mortgaged property for the satisfaction of the latter's obligation ofP1. since the proceeds of petitioners' time deposit was applied to the payment of interest and penalty charges for the preceding period. 1992. the RTC issued its Order13 denying respondent bank's Motion to Dismiss Complaint.. 1992.7 million covered by PN No.e.000.000. 84-055.00 was increased to P594. 284051 had already been assigned to respondent bank. i. Respondent bank also claimed that petitioners were fully apprised of the bank's terms and conditions.00 loan obligation should have been considered paid. Respondent bank filed its Motion to Lift Restraining Order.00 loan was already P3. and not the P300. . 1992. preliminary injunction.

5 million as of the auction sale. However.7 million and respondent bank's bid price was P3.5 million.7 million loan which petitioners obtained from respondent bank after the P300.00 in favor of respondent bank. which was computed based on the 23% interest rate and 12% penalty charge agreed upon by the parties. hence.043.000. 1992. which was later extended to February 17. The RTC found that the 23% interest rate p. the stipulated interest and penalty charges from January 31. As to the P1. which was then the prevailing loan rate of interest could not be considered unconscionable.000.000. the Court need not order the plaintiffs to pay damages under the general concept that there should be no premium on the right to litigate. the latter should return to petitioners the difference of P1. the RTC issued its Order14 granting respondent's demurrer to evidence.294.7 million loan obligation for purposes of applying the proceeds of the auction sale. the CA issued its assailed Decision. 1999. the dispositive portion of which reads: WHEREFORE. the dispositive portion of which reads: . 1992. 1992 to July 7. and allowed the loan interest to accumulate reaching the amount of P594.54 as of April 10. since banks are not hospitable or equitable institutions but are entities formed primarily for profit.991. Petitioner Florentino was presented as the lone witness for the plaintiffs.00 as penalty charges was unjust and without basis. since petitioners had not paid any single centavo of the P1. SO ORDERED. Thus.836. if the loan was unpaid.15 The RTC found that as to the P300. NO COSTS.00 loan.00 loan to the P1. the amount of P292. Considering there is no evidence of bad faith. 1985. A Comment was filed by respondent bank and petitioners filed their Reply thereto.82 as of January 31. it had reached the amount of P3.a. 2010. respondent bank filed a Demurrer to Evidence.7 million loan which showed they had not complied with any part of the obligation. The RTC found no legal basis for petitioners' claim that since the total obligation was P1. which maturity coincided with petitioners' loan maturity. 1993 added to the loan already amounted to P3.18 per Statement of Account dated April 27. petitioners had assigned petitioner Florentino's time deposit in the amount of P300. 1993.00 loan. after the restraining order was lifted. Subsequently. On November 15.171.Trial thereafter ensued. It also found that Article 1229 of the Civil Code invoked by petitioners for the reduction of the interest was not applicable. respondent bank should had just applied the time deposit to the loan. 1993. It found that since petitioners' obligation had reached P2.. but the certificate of sale was executed by the sheriff only on July 7.000. Petitioners appealed the RTC decision to the CA. respondent bank did not.600. On June 17. and that contrary to petitioners' claim. this case is hereby ordered DISMISSED. respondent bank did not add the P300.8 million.

5% per month on aP500.16 The CA found that the time deposit of P300.81% per month on a P10 million loan.000. terms and conditions as they may deem convenient. TARLAC CITY.00 loan excessive. collection charges and attorney's fees agreed upon. Spouses Ganzon-Olan. petitioners filed this petition for review arguing that: THE HON. the parties thereto are bound to comply with them. 1999 issued by the Regional Trial Court (RTC). In Toring v. or a 5. which are equivalent to 84% and 60% p. The CA. petitioners and respondent bank agreed upon on a 23% p. interest rate and the 12% p.WHEREFORE. 1992. contrary to morals if not against the law and declared such stipulation void.00 was equivalent only to the principal amount of the loan ofP300.000. Spouses Ganzon-Olan. the outstanding balance of petitioners' loan was P594." Hence. if the stipulations in the contract are valid..700. thus. It also found not persuasive petitioners' claim that the P300. While in Chua v. invoking our ruling in Medel v. We said that we .000.a.22 the stipulated interest rates involved were 3% and 3. Petitioners filed their Motion for Reconsideration. but such freedom is not absolute.00 loan to which they agreed upon is excessive or unconscionable under the circumstances. public order. DATED NOVEMBER 15.54. interest rate on the P1. The Order dated November 15. good customs. 7550 is hereby AFFIRMED. Court of Appeals. 1999.a. morals. found that the interest rates and penalty charges imposed were not unconscionable and adopted in toto the findings of the RTC on the matter. penalty. the instant appeal is hereby DENIED. COURT OF APPEALS ERRED IN AFFIRMING THE ORDER OF THE RTCBRANCH 64.00 and would not be sufficient to cover the interest. However. we had reduced the same to 1% per month or 12% p. petitioners now contend that the interest rate of 23% p.a.a. In Medel v.7 million loan. Parties are free to enter into agreements and stipulate as to the terms and conditions of their contract. In this case.a. penalty charge on petitioners'P1.00 loan was added to the P1. respectively. which the CA denied in a Resolution dated July 20.a.7 million loan. DESPITE THE FACT THAT THE SAME IS CONTRARY TO SETTLED JURISPRUDENCE ON THE MATTER. likewise.18 Toring v.043. Timan. in Civil Case No. hence. or public policy. As Article 1306 of the Civil Code provides. Court of Appeals. Tarlac City. 2011. Branch 64.17 The issue for resolution is whether the 23% p. "The contracting parties may establish such stipulations.19 and Chua v. provided they are not contrary to law.20 We are not persuaded. which we find under the circumstances excessive and reduced the same to 1% per month.000. in the Statement of Account dated April 10. Timan. unconscionable and exorbitant.a. Hence. clauses. imposed by respondent bank is excessive or unconscionable. since such contract is the law between the parties.21 we found the stipulated interest rate of 66% p.000.23 where the stipulated interest rates were 7% and 5% a month.

considering that the mortgage agreement was freely entered into by both parties. Also referred to as a penalty clause. we answered in the negative and held: In Spouses Zacarias Bacolor and Catherine Bacolor v.00. The obligor would then be bound to pay . Thus. may not be considered unconscionable. CA. it is expressly recognized by law. We also do not find the stipulated 12% p.a. the Court finds that the 24% per annum interest rate.000. thus.a. stipulated interest rate was not considered unconscionable. the interest rate agreed upon by the parties was only 23% p. there is no similarity of factual milieu for the application of those cases. or less than 2% per month.24 In this case.00.a. Moreover. 2227 of the New Civil Code. may not be considered as unconscionable and excessive.27 we held: The 1% surcharge on the principal loan for every month of default is valid. As such. interest rate imposed on petitioners' loan in this case can by no means be considered excessive or unconscionable. penalty charge excessive or unconscionable. unconscionable and exorbitant. agreed upon by petitioners and respondent bank to be unconscionable. In Ruiz v. Court of Appeals. hence.a..26 Clearly. We do not consider the interest rate of 23% p. jurisprudence establish that the 24% p. the same is the law between them and they are bound to comply with the provisions contained therein. Banco Filipino Savings and Mortgage Bank. provided for in the subject mortgage contracts for a loan of P225. the Court ruled that the borrowers cannot renege on their obligation to comply with what is incumbent upon them under the contract of loan as the said contract is the law between the parties and they are bound by its stipulations. Based on the above jurisprudence. this Court held that the interest rate of 24% per annum on a loan of P244. and is separate and distinct from interest payment.649. Dagupan City Branch. Court of Appeals.25 where the issue raised was whether the 24% p. the 23% p. in Garcia v.a. stipulated interest rate is unreasonable under the circumstances. this Court sustained the agreement of the parties to a 24% per annum interest on an P8. the stipulation was void for being contrary to morals. It is an accessory undertaking to assume greater liability on the part of an obligor in case of breach of an obligation.need not unsettle the principle we had affirmed in a plethora of cases that stipulated interest rates of 3% per month and higher are excessive. Also.a. In Villanueva v.250.1âwphi1 This surcharge or penalty stipulated in a loan agreement in case of default partakes of the nature of liquidated damages under Art. which are much lower than those interest rates agreed upon by the parties in the above-mentioned cases.00 loan finding the same to be reasonable and clearly evidenced by the amended credit line agreement entered into by the parties as well as two promissory notes executed by the borrower in favor of the lender. agreed upon by the parties.000.

30 Here. . The Decision dated June 17.the stipulated amount of indemnity without the necessity of proof on the existence and on the measure of damages caused by the breach..a. A contract is the law between the parties and they are bound by the stipulations therein. in order to avoid the payment of the penalty. 2011 of the Court of Appeals are hereby AFFIRMED. the petition for review is DENIED. 2010 and the Resolution dated July 20.the failure of the performance was due to either force majeure or the acts of the creditor himself. WHEREFORE. SO ORDERED. petitioners defaulted in the payment of their loan obligation with respondent bank and their contract provided for the payment of 12% p.29 we held that: x x x The enforcement of the penalty can be demanded by the creditor only when the non-performance is due to the fault or fraud of the debtor. Ltd. Family Foods Manufacturing Co. petitioners cannot now back out on their obligation to pay the penalty charge. the debtor has the burden of proving an excuse . penalty charge. and since there was no showing that petitioners' failure to perform their obligation was due to force majeure or to respondent bank's acts.. The non-performance gives rise to the presumption of fault. x x x28 And in Development Bank of the Philippines v.

Subsequently. ordering respondent Local Government of Quezon City (the City) to pay petitioner Henry L. Commissioners Ostaco and Alcantara. The Facts On November 7. 1996.00 as exemplary damages and attorney’s fees equivalent to one percent (1%) of the total amount due. Petitioner.: Assailed in this petition for review on certiorari1 are the January 20. Balintawak. otherwise known as the "Local Government Code of 1991.9 During the preliminary conference on November 8. No. Branch 80 (RTC) in Civil Case No.R. the City. 91964 which affirmed with modification the August 22.500. 2006. 2006. 2012 Decision2 and July 16. vs. 2008 Order4 of the Regional Trial Court of Quezon City.7 On March 18. m.00 with the Office of the Clerk of Court. Carlo Alcantara (Commissioner Alcantara) as commissioners to determine the proper amount of just compensation to be paid by the City for the subject property. Ordinance No. 2012 Resolution3of the Court of Appeals (CA) in CA-G. DECISION PERLAS-BERNABE. Jr.090. day-care center. Engr. SY. pursuant to Section 198 of Republic Act No. s-94. Victor Salinas (Commissioner Salinas) and Atty. 2008. only the amount of just compensation remained at issue. 1997. owned and registered under the name of Sy (subject property).10 On July 6. was enacted on April 12. filed a complaint for expropriation with the RTC in order to acquire a 1. 1994.5 which was intended to be used as a site for a multi-purpose barangay hall.6 The requisite ordinance to undertake the aforesaid expropriation namely. Q-96-29352. including P200. playground and community activity center for the benefit of the residents of Barangay Balingasa. J. 202690 June 5.R. 7160 (RA 7160). 2013 HENRY L. recommended the payment . LOCAL GOVERNMENT OF QUEZON CITY. the RTC appointed Edgardo Ostaco (Commissioner Ostaco). representing 15% of the fair market value of the subject property based on its tax declaration.000. Sy (Sy) just compensation set as P5. Respondent. in a Report dated February 11. m. Thus. through then Mayor Ismael Mathay.Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.00 per square meter (sq. CV No. parcel of land.. Quezon City.000 sq. Sy did not question the City’s right to expropriate the subject property.)." the City deposited the amount of P241. Sp-181.

22 Nonetheless.16 The CA Ruling In the Decision dated January 20.500. respectively.000. 1996 until full payment of just compensation.00 per sq. 1996. Commissioner Salinas filed a separate Report dated March 7. it found no basis for the award of damages and back rentals in favor of Sy. citing the principle that just compensation must be fair not only to the owner but to the expropriator as well. ordering the City to pay Sy the amount of P200.00. based on several sworn statements made by Sy himself. valuation made by independent appraisers Cuervo and Asian Appraisers in 1995 and 1996.15 Dissatisfied.000.000.12 the RTC.00 per sq.00 per sq.500.19 and (c) Sy’s own tax declaration for 1996. Sy filed an appeal with the CA. m.00 in total. adopted the findings of Commissioners Ostaco and Alcantara and thus.25 . m.00 per sq.14 Finally. m.500. considering that it was arrived at after taking into account: (a) the fair market value of the subject property in the amount of P4. it observed that the expropriation would not leave the rest of Sy’s properties useless as they would still be accessible through a certain Lot 8 based on the Property Identification Map. as just compensation. It found the appraisal of Commissioners Ostaco and Alcantara for the subject property to be more believable than the P13.21 The CA also denied Sy’s assertion that he should be entitled to damages on account of the purported shelving of his housing project. computed from November 7. based on the September 4. it held that the fair market value ofP5.20 stating that the subject property has a total market value of P2.050. 2008. however. subject property arrived at by Commissioners Ostaco and Alcantara was more than fair and reasonable. On the other hand. m. or P5. 2012. to be computed from the date of the filing of the expropriation complaint. m. recommending the higher amount ofP13.500.11 The RTC Ruling In the Order dated August 22. finding no sufficient evidence to support the same. Likewise.of P5.000. held that the just compensation for the subject property should be set at P5. m. m.272.00 per sq.00 as exemplary damages and attorney’s fees equivalent to one percent (1%) of the total amount due.24 It. 1996 recommendation of the City Appraisal Committee. while legal interest was not claimed.00 per sq. Rodriguez (MIAA). Accordingly.18 (b) the market value of the subject lot in the amount of P2.000 sq.500.000. citing the case of Manila International Airport Authority v.13 Further. m. for equity considerations.23 it awarded exemplary damages in the amount of P200. it awarded six percent (6%) legal interest.. denied Sy’s claim of back rentals considering that the RTC had already granted legal interest in his favor.00 per sq. for the 1.17 the CA affirmed the RTC’s ruling but modified the same. or on November 7.000. 2008..00 and attorney’s fees equivalent to one percent (1%) of the amount due because of the City’s taking of the subject property without even initiating expropriation proceedings.

the erroneous stamping of the Notice of Decision could have been averted if only he had instituted a credible filing system in his office to . 2012. this petition. instead of January 26.27 The City also filed a motion for reconsideration which was equally denied for lack of merit. Meris’ misstep based on his proffered reasons. it is apt to mention that Sy’s counsel.32 In this regard.31 which thus. any motion for reconsideration therefrom should have been filed not later than fifteen (15) days from receipt. 2012. 201226 for being filed out of time. Records show that. Evidently. on the Notice of Decision33 constitutes excusable negligence which should therefore. 2012 Decision was received by Sy on January 26.36 Applying these principles. justify a relaxation of the rules. The assertion is untenable. 2012 and as such. Issues Before The Court The present controversy revolves around the issue of whether the CA correctly: (a) dismissed Sy’s motion for reconsideration for being filed out of time. Failure to seasonably move for reconsideration. A claim of excusable negligence does not loosely warrant a relaxation of the rules. the duty rests on every counsel to see to adopt and strictly maintain a system that will efficiently take into account all court notices sent to him. Atty. (b) upheld the amount of just compensation as determined by the RTC as well as its grant of six percent (6%) legal interest. The Court’s Ruling The petition is partly meritorious. 2012. 2012. Verily. Meris). Tranquilino F. the Court observes that Sy’s motion for reconsideration was filed out of time and thus. Meris (Atty.28 Hence.30 However. and (c) awarded exemplary damages and attorney’s fees.29 or on February 10. A. the CA’s January 20. excusable negligence. the party invoking such should be able to show that the procedural oversight or lapse is attended by a genuine miscalculation or unforeseen fortuitousness which ordinary prudence could not have guarded against so as to justify the relief sought.35 In this accord. Sy filed his motion for reconsideration (subject motion) a day late. relaxation of procedural rules At the outset.Aggrieved. claims that his secretary’s inadvertent placing of the date January 27. or on February 13. the Court cannot excuse Atty. Sy moved for reconsideration which was denied in the Resolution dated July 16. was properly dismissed by the CA. renders the CA decision final and executory. as per the Postmaster’s Certification.34 The standard of carerequired is that which an ordinarily prudent man bestows upon his important business.

and one who desires to sell. In the case of Republic v. The Bulacan trial court. This is in line with the Court’s observation that the amount of just compensation. procedural rules may. at 12% per annum should help . if property is taken for public use before compensation is deposited with the court having jurisdiction over the case. between the taking of the property and the actual payment. as a matter of course. or where the interest of justice so requires. in its 1979 decision. legal interests accrue in order to place the owner in a position as good as (but not better than) the position he was in before the taking occurred. was correct in imposing interests on the zonal value of the property to be computed from the time petitioner instituted condemnation proceedings and "took" the property in September 1969.37 Corollarily. warrants the application of the 12% legal interest rate.39 the Court ruled that the debt incurred by the government on account of the taking of the property subject of an expropriation constitutes an effective forbearance which therefore. the rule. 2012 Decision already final and executory and hence. as well as the time of its accrual. should render the CA’s January 20. proceed to resolve these substantive issues.account for oversights such as that committed by his secretary. broadly described to be the price fixed by the seller in open market in the usual and ordinary course of legal action and competition or the fair value of the property as between one who receives. contrary to existing jurisprudence. may not be strictly followed where observance of it would result in the outright deprivation of the client’s liberty or property. ordinary prudence could have prevented such mistake. the Court deems it proper to relax the rules of procedure and thus. which states that the mistakes of counsel bind the client. This allowance of interest on the amount found to be the value of the property as of the time of the taking computed. viz: The constitutional limitation of "just compensation" is considered to be the sum equivalent to the market value of the property. it fixed at the time of the actual taking by the government. be relaxed for the most persuasive of reasons in order to relieve a litigant of an injustice not commensurate with the degree of his thoughtlessness in not complying with the procedure prescribed. bar the instant petition – is incommensurate to the injustice which Sy may suffer. being an effective forbearance. Indeed. In this respect. the final compensation must include interests on its just value to be computed from the time the property is taken to the time when compensation is actually paid or deposited with the court. the Court holds that the correct rate of legal interest to be applied is twelve percent (12%) and not six percent (6%) per annum. the Court finds that the procedural consequence of the abovediscussed one-day delay in the filing of the subject motion – which. owing to the nature of the City’s obligation as an effective forbearance. the rate of legal interest. Thus. B. Be that as it may. Rate of legal interest and time of accrual Based on a judicious review of the records and application of jurisprudential rulings.38 As applied in this case. nonetheless. were incorrectly adjudged by both the RTC and the CA. In fine. CA.

Judge Lolita Contreras-Besana . exemplary damages and attorney’s fees should be awarded to the landowner if the government takes possession of the property for a prolonged period of time without properly initiating expropriation proceedings.47 wherein the Court said: . suggests.. considering that the expropriated property was already being used as Barangay day care and office. it already commenced with the taking of the subject property as early as 1986.41 it has been repeated time and again that the award of 12% interest is imposed in the nature of damages for delay in payment which in effect makes the obligation on the part of the government one of forbearance.1âwphi1 As correctly observed by the CA. notwithstanding the lack of proper authorization. in Land Bank of the Philippines v. the Court. citing as basis the MIAA case. i. Accordingly. only on April 12. resolution to effect expropriation. 1994 and filed its expropriation complaint on November 7. Case law dictates that there is "taking" when the owner is actually deprived or dispossessed of his property.eliminate the issue of the constant fluctuation and inflation of the value of the currency over time. however. legal interest should have already accrued. Records show that the City itself admitted in its Appellee’s Brief filed before the CA that as early as 1986.46 Therefore. the lack of proper authorization. 1996. In this light. Rivera. 1996. the Court has held that:43 x x x [T]he final compensation must include interests on its just value to be computed from the time the property is taken to the time when compensation is actually paid or deposited with the court. "a burden was already imposed upon the owner of the subject property x x x. interest must run from such time. the legal character of the City’s action as one of "taking" did not change. the CA noted that the City enacted Ordinance No. as of the date of the taking. when there is a practical destruction or a material impairment of the value of his property or when he is deprived of the ordinary use thereof. (Emphasis and underscoring supplied) As to the reckoning point on which the legal interest should accrue. as it previously admitted. x x x (Emphasis and underscoring supplied) In similar regard. proceed without any consequence."42 Thus. the property was actually taken during that time and from thereon. This is to ensure prompt payment of the value of the land and limit the opportunity loss of the owner that can drag from days to decades. s-94. in its January 20. 2012 Decision. However.40 pronounced that: In many cases decided by this Court.e. The MIAA ruling was applied in the more recent case of City of Iloilo v. In this relation."44 Notably.45 did not affect the character of the City’s taking of the subject property in 1986 as the CA. x x x (Emphasis supplied) This is based on the principle that interest "runs as a matter of law and follows from the right of the landowner to be placed in as good position as money can accomplish. This irregularity does not. the same should be computed from the time of the taking of the subject property in 1986 and not from the filing of the complaint for expropriation on November 7. Sp-181.

the petition is PARTLY GRANTED. the case must be remanded to the RTC in order to properly determine the amount of just compensation during such time the subject property was actually taken. 1996 recommendation of the City Appraisal Committee. however. The said valuation was actually arrived at after considering: (a) the September 4. as just compensation which was set by the RTC and upheld by the CA. Hence. from said point up to full payment by the MIAA. the Court finds the grant of exemplary damages in the amount of P200. WHEREFORE. the Court cannot sustain the amount of P5. Consequently. CV No.48 It is well-settled that the amount of just compensation is to be ascertained as of the time of the taking. that the City of Iloilo should be held liable for damages for taking private respondent’s property without payment of just compensation. the MIAA occupied the subject lot without the benefit of expropriation proceedings and without the MIAA exerting efforts to ascertain ownership of the lot and negotiating with any of the owners of the property. This is based on the principle that interest "runs as a matter of law and follows from the right of the landowner to be placed in as good position as money can accomplish. 2012 Resolution of the Court of Appeals in CA-G. the above-stated documents do not reflect the value of the subject property at the time of its taking in 1986 but rather. as of the date of the taking x x x. m. which in this case should be the legal interest (6%) on the value of the land at the time of taking. Amount of just compensation Finally.00 as well as attorney’s fees equivalent to 1% of the total amount due amply justified. C. 91964 are hereby SET ASIDE. Rodriguez.000. In Manila International Airport Authority v. and (c) Sy’s own tax declaration for 1996. the Court held that a government agency’s prolonged occupation of private property without the benefit of expropriation proceedings undoubtedly entitled the landowner to damages: Such pecuniary loss entitles him to adequate compensation in the form of actual or compensatory damages. To forestall any further delay in the resolution of this case. the trial court is hereby ordered to fix the just compensation for petitioner Henry L. Sy's property with dispatch and report to the Court its compliance. respondent Local Government of Quezon City is ordered to PAY exemplary damages in the amount ofP200.49 However. The January 20. xxxx For more than twenty (20) years.500. its valuation in 1996. 2012 Decision and July 16. square as it is with existing jurisprudence. these are wanton and irresponsible acts which should be suppressed and corrected.R.000. Finally.00 and attorney's . citations omitted) All told. the award of exemplary damages and attorneys fees is in order. (Emphasis and underscoring supplied.00/sq. x x x. Accordingly. the case is REMANDED to the trial court for the proper determination of the amount of just compensation in accordance with this Decision. (b) several sworn statements made by Sy himself.We stress. To our mind.

SO ORDERED.fees equivalent to one percent (1%) of the amount due. after final determination of the amount of just compensation. .

to start in April.296.R. we hereby adopt the CA’s findings. and plaintiff-appellee APAC. and (iii) after making deliveries pursuant to the purchase orders and despite demands by plaintiff-appellee." but prior to the implementation of the said payment agreement. defendants-appellants engaged the services of plaintiff-appellee by buying aggregates materials from plaintiff-appellee. represented by CESAR M. vs. ONG. which plaintiff-appellee accepted. plaintiff-appellee filed with the trial court a complaint against defendants-appellees for collection of sum of money with damages.. as the Court of Appeals (CA) adopted the findings of fact of the Regional Trial Court (RTC) of Quezon City. Ong. for which the latter had delivered and supplied good quality crushed basalt rock. JR.Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.80 "plus legal interest at the rate of not less than 6% monthly. Jr. the primordial issue to be resolved is whether the Court of Appeals (CA)1 correctly affirmed the court a quo2 in holding petitioner liable to respondent for attorney’s fees. or "Check Before Delivery. The Antecedent Facts Considering that there are no factual issues involved. APAC MARKETING CORPORATION. (ii) the parties had initially agreed on the terms of payment. The complaint prayed for payment of the amount of P782. 190957 June 5. represented by defendantsappellants Rogelio Espiritu and Rolando Macasaet. CJ. No. alleging that (i) in March 1998. Respondents. Petitioner. whereby defendants-appellants would issue the check corresponding to the value of the materials to be delivered. involving crushed basalt rock delivered by plaintiffappellee to defendant-appellant PNCC.: In this Petition for Review on Certiorari under Rule 45 of the Revised Rules on Civil Procedures. . DECISION SERRENO. as follows: The present case involves a simple purchase transaction between defendant-appellant Philippine National Construction Corporation (PNCC).. 1999 until the full obligation is completely settled and paid. 2013 PHILIPPINE NATIONAL CONSTRUCTION CORPORATION. On August 17. defendants appellants failed and refused to pay and settle their overdue accounts. defendants-appellants requested from plaintiff-appellee a 30-day term from the delivery date within which to pay. 1999." among others. Branch 96. represented by Cesar M.

P220.00 as attorney’s fees. 1999. the trial court rendered a Decision. but still it ordered them to pay legal interest of twelve per cent (12%) per annum. the award by the trial court of actual damages in the amount ofP782. only plaintiff-appellee presented its evidence. Defendants-appellants filed a motion for reconsideration. SO ORDERED. 2006. 2. as can be seen from the substantial reduction of its overdue account as of August 1999. the trial court denied the motion to dismiss." .083 2.00 per court appearance. defendants-appellants filed a motion to dismiss. On July 10. trial was held.00 as attorney’s fees. to wit: 1. 2006 is hereby modified. judgment is hereby rendered in favor of the plaintiff. the dispositive portion of which reads: WHEREFORE. the decision dated July 10. amounted to onlyP474. Thus: "WHEREFORE. ordering defendants jointly and solidarily to pay: 1. plus P3.80 as actual damages. P50. alleging that during the pendency of the case.80 was without factual and legal bases.000.095. SO ORDERED. the trial court considered defendants-appellants’ claim of full payment of the principal obligation. 3.92. by ordering defendants jointly and solidarily to pay plaintiff as follows. alleging that the complaint was premature considering that defendant-appellant PNCC had been faithfully paying its obligations to plaintiff-appellee. the principal obligation was fully paid and hence. P50. Cost of Suit. In an Order dated October 6. In an Order dated January 17.00 per court appearance.000. defendants-appellants were deemed to have waived the presentation of their evidence. 2006.000. based on the latest liquidation report. plus P3. defendants-appellants filed their answer. P782. Thus. For their repeated failure to attend the hearings.234. Cost of suit.On November 16. However. After the submission of the respective pre-trial briefs of the parties. 2000.000.296. alleging that the obligation of defendantappellant PNCC was only with respect to the balance of the principal obligation that had not been fully paid which. 3.269.

this article restrictively enumerates the instances when these fees may be recovered. However. the parties may stipulate the recovery of attorney’s fees. 2006 is affirmed. THE REGIONAL TRIAL COURT GRAVELY ERRED IN AWARDING INTEREST AT THE RATE OF 12% PER ANNUM AMOUNTING TO P220. On 29 July 2009. The dispositive portion of the CA Decision reads as follows: WHEREFORE.R. the Special Fourth Division of the CA promulgated a Decision3 in CAG. petitioner fully agreed with the CA Decision imposing 6% legal interest per annum on the principal obligation and absolving Rogelio Espiritu and Rolando Macasaet from any liability as members of the board of directors of PNCC.083 AND ATTORNEY’S FEES IN FAVOR OF PLAINTIFF-APPELLEE. to wit: . computed from January 8. Defendants-appellants Rogelio Espiritu and Rolando Macasaet are absolved from liability. 2006 is affirmed in all other respects. herein petitioner filed a Motion for Reconsideration. petitioner now assails before us the 9 July 2009 Decision of the CA by raising the sole issue of whether the CA gravely erred in awarding attorney’s fees to respondent. II. In the absence on such stipulation. the main focus of the Motion for Reconsideration was on the CA’s affirmation of the court a quo’s Decision awarding attorney’s fees in favor of respondent.Defendants-appellants filed the present appeal which is premised on the following assignment of errors: I. the appealed Order dated October 6. CV No. affirming with modification the assailed Decision of the court a quo. subject to the modification that defendant-appellant PNCC is ordered to pay legal interest at six per cent (6%) per annum on the principal obligation. which raised the lone issue of the propriety of the award of attorney’s fees in favor of respondent. THE COURT’S RULING The Petition is impressed with merit. Article 2208 of the New Civil Code of the Philippines states the policy that should guide the courts when awarding attorney’s fees to a litigant. As a general rule. The Order dated October 6. the appellate court’s Former Special Fourth Division denied petitioner’s Motion for Reconsideration in a Resolution dated 18 January 2010. Thus.6 THE SOLE ISSUE Aggrieved.4 It should be noted that in said motion.234. THE REGIONAL TRIAL COURT GRAVELY ERRED IN HOLDING DEFENDANTS ROGELIO ESPIRITU AND ROLANDO MACASAET JOINTLY AND SOLIDARILY LIABLE WITH DEFENDANT PNCC. 88827. THE RULING OF THE COURT OF APPEALS On 9 July 2009. 1999 until its full payment in January 2001.

and equitable justification. v. (8) In actions for indemnity under workmen's compensation and employer's liability laws. They are not to be awarded every time a party wins a suit. (10) When at least double judicial costs are awarded. (6) In actions for legal support. the attorney's fees and expenses of litigation must be reasonable. cannot be recovered. (3) In criminal cases of malicious prosecution against the plaintiff. except: (1) When exemplary damages are awarded. CA. The general rule is that attorney’s fees cannot be recovered as part of damages because of the policy that no premium should be placed on the right to litigate. (5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's plainly valid. (7) In actions for the recovery of wages of household helpers.Art. In ABS-CBN Broadcasting Corp. attorney's fees and expenses of litigation. laborers and skilled workers. (11) In any other case where the court deems it just and equitable that attorney's fees and expenses of litigation should be recovered.7 this Court had the occasion to expound on the policy behind the grant of attorney’s fees as actual or compensatory damages: (T)he law is clear that in the absence of stipulation. (2) When the defendant's act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest. In the absence of stipulation. (9) In a separate civil action to recover civil liability arising from a crime. Even when a claimant is compelled to litigate with third persons or to incur expenses to protect his rights. just and demandable claim. attorney’s fees may be recovered as actual or compensatory damages under any of the circumstances provided for in Article 2208 of the Civil Code. legal. other than judicial costs. 2208. In all cases. . The power of the court to award attorney’s fees under Article 2208 demands factual. (4) In case of a clearly unfounded civil action or proceeding against the plaintiff. still attorney’s fees may not be awarded where no sufficient showing of bad faith could be reflected in a party’s persistence in a case other than an erroneous conviction of the righteousness of his cause.

or equitable justification for applying paragraph 11 of Article 2208 as basis the latter’s exercise of discretion in holding petitioner liable for attorney’s fees. there must be compelling legal reason to bring the case within the exceptions provided under Article 2208 of the Civil Code to justify the award. legal.9 We agree with petitioner on these points. On occasions that those fees are awarded. while in its extraordinary concept. attorney's fees represent the reasonable compensation paid to a lawyer by his client for the legal services he has rendered to the latter. Hence.1âwphi1 Petitioner contends that the RTC’s Decision has no finding that would fall under any of the exceptions enumerated in Article 2208 of the new Civil Code. and equitable justification to avoid speculation and conjecture surrounding the grant thereof. It is not enough that they merely state the amount of the grant in the dispositive portion of their decisions. or equitable justification for the award of attorney’s fees in favor of respondent. Attorney's fees as part of damages are awarded only in the instances specified in Article 2208 of the Civil Code. There is therefore an absence of an independent CA finding of the factual circumstances and legal or equitable basis to justify the grant of attorney’s fees. and in all cases it must be reasonable. In the ordinary sense. legal. The CA merely adopted the RTC’s rational for the award. which in this case we find to be sorely inadequate. the basis for the grant must be clearly expressed in the decision of the court.In Benedicto v.10 Due to the special nature of the award of attorney’s fees. We can glean from the above ruling that attorney’s fees are not awarded as a matter of course every time a party wins. a rigid standard is imposed on the courts before these fees could be granted. they may be awarded by the court as indemnity for damages to be paid by the losing party to the prevailing party. There was no elaboration on the basis. legal. As such. as part of damages. We have consistently held that an award of attorney’s fees under Article 2208 demands factual. We do not put a premium on the right to litigate. thus. Attorney's fees. counsel's fees are not awarded every time a party prevails in a suit because of the policy that no premium should be placed on the right to litigate.11 It bears reiteration that the award of attorney’s fees is an exception rather than the general rule. Villaflores. considering the dual concept of these fees as ordinary and extraordinary: It is settled that the award of attorney's fees is the exception rather than the general rule. . it is imperative that they clearly and distinctly set forth in their decisions the basis for the award thereof.8 we explained the reason behind the need for the courts to arrive upon an actual finding to serve as basis for a grant of attorney’s fees. but cannot find any factual. are not necessarily equated to the amount paid by a litigant to a lawyer.12 We have perused the assailed CA’s Decision. it alleges that the court a quo has not given any factual. Further. The appellate court simply quoted the portion of the RTC Decision that granted the award as basis for the affirmation thereof. it is necessary for the court to make findings of fact and law that would bring the case within the ambit of these enumerated instances to justify the grant of such award.

13 The only discernible reason proffered by the trial court in granting the award was that respondent.R.00 which it paid as acceptance fee and P3. we find that there is an obvious lack of a compelling legal reason to consider the present case as one that falls within the exception provided under Article 2208 of the Civil Code.000. in favor of respondent APAC Marketing Incorporated. we hold that the award of attorney’s fees by the court a quo. to litigate and to protect his interest by reason of an unjustified act of the other party. as sustained by the appellate court.000 as appearance fee. in that the award of attorney’s fees in the amount of P50.The RTC found as follows: x x x since it is clear that plaintiff was compelled to hire the services of a counsel. as complainant in the civil case. WHEREFORE. Absent such finding. is hereby DELETED. No pronouncement as to costs.00 as appearance fee. was improper and must be deleted. plaintiff is entitled to recover attorney’s fees in the amount of P50.000. the foregoing Petition is GRANTED. was forced to litigate to protect the latter’s interest. Thus. The assailed Decision dated 9 July 2009 of the Court of Appeals in CA-G. CV No.000 as acceptance fee and P3. 88827 is MODIFIED. Republic of the Philippines SUPREME COURT Manila . SO ORDERED.

(Vertex). Although Vertex complied with the request. Vertex prayed for the rescission of the sale and demanded the reimbursement of the amount it paid (or P1. Sometime in August 1997. 2007 of the Regional Trial Court (RTC) of Pasig City. Seventeen (17) months after the sale (or on July 28. Vertex wrote FEDGI a letter demanding the issuance of a stock certificate in its name. 2012 of the Court of Appeals (CA) in CA-G..000. This prompted Vertex to make a final demand on March 17.: Before the Court is the petition for review on certiorari1 under Rule 45 of the Rules of Court.. FEGDI sold. (FEGDI) and Fil-Estate Land. FELI and Forest Hills. 202079 June 10. Branch 161. DECISION BRION. FELI replied. 68791. Petitioners.100. 2013 FIL-ESTATE GOLF AND DEVELOPMENT. No. and FILESTATE LAND. in consideration for its financing support and construction efforts. the share remained in the name of FEGDI. Inc.100. INC. 2002 a Complaint for Rescission with Damages and Attachment against FEGDI. was issued several shares of stock of Forest Hills. 89296. Inc. filed by petitioners Fil-Estate Golf and Development. (FELl). 2001. 1999. FELI is also a stock corporation. instructed Forest Hills to recognize Vertex as a shareholder. in Civil Case No. CV No.4 THE FACTS FEGDI is a stock corporation whose primary business is the development of golf courses. in turn. but is engaged in real estate development.00). INC.R. on installment. INC. 2000). For this reason. Vertex filed on January 7. no certificate was issued. Inc.SECOND DIVISION G. As the demand went unheeded. Vertex enjoyed membership privileges in Forest Hills. RSACC advised FEGDI of the sale to Vertex and FEGDI. vs. The assailed CA rulings reversed the decision dated March 1. During the pendency of the rescission action (or on . Respondent. It averred that the petitioners defaulted in their obligation as sellers when they failed and refused to issue the stock certificate covering the subject share despite repeated demands. plus interest. on February 11. assailing the decision2 dated February 22. initially requested Vertex to first pay the necessary fees for the transfer. FEGDI was the developer of the Forest Hills Golf and Country Club (Forest Hills) and. J. On the basis of its rights under Article 1191 of the Civil Code. Prior to the full payment of the purchase price. to RS Asuncion Construction Corporation (RSACC) one Class "C" Common Share of Forest Hills for P1. VERTEX SALES AND TRADING. RSACC sold.R. 2012 and the resolution3 dated May 31. Despite Vertex’s full payment.000.00.5 the Class "C" Common Share to respondent Vertex Sales and Trading.

a certificate of stock was issued in Vertex’s name. 7 The CA ordered the petitioners to return the amounts paid by Vertex by reason of the sale. then it should be considered a substantial breach warranting the rescission of the sale. In its decision. The first was when their counsel used the letterhead of FELI instead of FEGDI in its reply-letter to Vertex. In fact. In its comment to the petition. Since there was delay in the issuance of a certificate for more than three years. the CA reversed the RTC and rescinded the sale of the share. THE ISSUE . declaring that the delay in the issuance of a stock certificate constituted as substantial breach that warranted a rescission. FELI stated that it is not a party to the contract sought to be rescinded. In light of these circumstances. the sale had already been consummated.8 Vertex alleged that the fulfillment of its obligation to pay the purchase price called into action the petitioners’ reciprocal obligation to deliver the stock certificate. It argued that it was just recklessly dragged into the action due to a mistake committed by FEGDI’s staff on two instances.January 23. They contend that the CA erred when it reversed the RTC’s dismissal of Vertex’s complaint. It ruled that delay in the issuance of stock certificates does not warrant rescission of the contract as this constituted a mere casual or slight breach. the CA held that there can be no valid transfer of shares where there is no delivery of the stock certificate. FEGDI argued that the delay cannot be considered a substantial breach because Vertex was unequivocally recognized as a shareholder of Forest Hills. Vertex further alleged that its use and enjoyment of Forest Hills’ facilities cannot be considered delivery and transfer of ownership. Vertex’s nominees became members of Forest Hills and fully enjoyed and utilized all its facilities. THE PARTIES’ ARGUMENTS FEGDI and FELI filed the present petition for review on certiorari to assail the CA rulings. RULING OF THE RTC The RTC dismissed the complaint for insufficiency of evidence. but Vertex refused to accept it. Citing Section 63 of the Corporation Code. 2002). the issuance of the stock certificate is just a collateral matter to the sale and the stock certificate is not essential to "the creation of the relation of shareholder. the second was when they used the receipt of FELI for receipt of the documentary stamp tax paid by Vertex. It added that RSACC also used its shareholder rights and eventually sold its share to Vertex despite the absence of a stock certificate. It also observed that notwithstanding the delay in the issuance of the stock certificate. For its part."6 RULING OF THE CA Vertex appealed the dismissal of its complaint. It considered the prolonged issuance of the stock certificate a substantial breach that served as basis for Vertex to rescind the sale. delay in the issuance of a stock certificate cannot be considered a substantial breach.

1999 but the stock certificate was only delivered on January 23. This was a substantial breach of their contract that entitles Vertex the right to rescind the sale under Article 1191 of the Civil Code. the number of the certificate or certificates and the number of shares transferred. Under these facts. and sealed with the seal of the corporation shall be issued in accordance with the by-laws." In that case. considered in relation to the governing law. – The capital stock of stock corporations shall be divided into shares for which certificates signed by the president or vice-president. until the transfer is recorded in the books of the corporation showing the names of the parties to the transaction. 63. No shares of stock against which the corporation holds any unpaid claim shall be transferable in the books of the corporation.. 2002 after Vertex filed an action for rescission against FEGDI. It is not entirely correct to say that a sale had . countersigned by the secretary or assistant secretary. Section 63 of the Corporation Code provides: SEC. (Trans-Phil) and Roland Garcia bought Piltel shares from Finvest Securities Co.Given the parties’ arguments. shall be valid. which was later on amended to an action for rescission. (Finvest Securities) in February 1997. In this case. physical delivery of a stock certificate is one of the essential requisites for the transfer of ownership of the stocks purchased. Shares of stock so issued are personal property and may be transferred by delivery of the certificate or certificates indorsed by the owner or his attorney-in-fact or other person legally authorized to make the transfer. however. the sole issue for the Court to resolve is whether the delay in the issuance of a stock certificate can be considered a substantial breach as to warrant rescission of the contract of sale. Vertex fully paid the purchase price by February 11. THE COURT’S RULING The petition lacks merit. Inc. representing the shares of stock purchased by Vertex. The Court ruled that Finvest Securities’ failure to deliver the shares of stock constituted substantial breach of their contract which gave rise to a right on the part of Trans-Phil and Garcia to rescind the sale. the date of the transfer. Trans-Phil Marine Ent. Since Finvest Securities failed to deliver the stock certificates.9 where the Court held that in "a sale of shares of stock. Court of Appeals. Certificate of stock and transfer of shares. within a reasonable time from the point the shares should have been delivered.. Trans-Phil and Garcia filed an action first for specific performance. Inc. FEGDI clearly failed to deliver the stock certificates. except as between the parties.1âwphi1 No transfer. Physical delivery is necessary to transfer ownership of stocks The factual backdrop of this case is similar to that of Raquel-Santos v.

SO ORDERED. As can be seen from the records. Thus FELl should be absolved from any liability. 2012 and the resolution dated May 31. the CA is correct in not awarding damages since Vertex failed to prove by sufficient evidence that it suffered actual damage due to the delay in the issuance of the certificate of stock.already been consummated as Vertex already enjoyed the rights a shareholder can exercise. provided the essential requisites are present.10 Accordingly. 89296 are AFFIRMED with the MODIFICATION that Fil-Estate Land. and Vertex. [the contract] is perfected. the parties are only FEGDI. by its express terms. Regarding the involvement of FELI in this case. The decision dated February 22. FELl was only dragged into the action when its staff used the wrong letterhead in replying to Vertex and issued the wrong receipt for the payment of transfer taxes. Inc.1âwphi1 The Civil Code upholds the spirit over the form. a contract is a meeting of minds between two persons. the amount paid to FEGDI by reason of the sale should be returned to Vertex. we hereby DENY the petition. The enjoyment of these rights cannot suffice where the law. as buyer. is ABSOLVED from any liability. no privity of contract exists between Vertex and FELI. From the moment there is a meeting of minds between the parties.R. subject matter and cause. requires a specific form to transfer ownership. A contract is upheld as long as there is proof of consent. such restitution is necessary to bring back the parties to their original situation prior to the inception of the contract. it deems an agreement to exist. 2012 of the Court of Appeals in CA-G. WHEREFORE. "Mutual restitution is required in cases involving rescission under Article 1191" of the Civil Code. as seller."11 In the sale of the Class "C" Common Share. "As a general rule. Moreover. . it is generally obligatory in whatever form it may have been entered into. On the amount of damages. CV No. thus.

Nine years later. JESUS B. Sime Darby paid for the monthly dues and other assessments on the club share.000.363. As a result. DECISION CARPIO.R.7 As part of the arrangement.R. 202247 June 19. Respondent. The Facts Petitioner Sime Darby Pilipinas.101. Sime Darby fully paid Mendoza his separation pay amounting to more thanP3. Inc. Before the sale could push through. Petitioner. or sometime in July 2004.. INC. Sime Darby claimed that it was the practice of the company to extend to its senior managers and executives the privilege of using and enjoying the facilities of .Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G. However. Mendoza endorsed the Club Share Certificate8 in blank and executed a Deed of Assignment. Sime Darby filed a complaint10 for damages with writ of preliminary injunction against Mendoza with the Regional Trial Court (RTC) of Makati City. and distribution of the company's tires and rubber products. When Mendoza retired in April 1995. however.000. the broker required Sime Darby to secure an authorization to sell from Mendoza since the club share was still registered in Mendoza’s name. On 13 September 2005. On 3 July 1987. 2013 SIME DARBY PILIPINAS. (Sime Darby) employed Jesus B. Sime Darby bought a Class "A" club share4 in Alabang Country Club (ACC) from Margarita de Araneta as evidenced by a Deed of Absolute Sale. From the time of purchase in 1987.000. MENDOZA. vs. and handed over the documents to Sime Darby. Branch 132. was placed under the name of Mendoza in trust for Sime Darby since the By-Laws6 of ACC state that only natural persons may own a club share.64.9 also in blank. Mendoza (Mendoza) as sales manager to handle sales. CV No. J.5 The share. 89178.: The Case Before us is a petition for review on certiorari1 assailing the Decision2 dated 30 March 2012 and Resolution3dated 6 June 2012 of the Court of Appeals in CA-G. marketing. No. claiming that this represented his unpaid separation benefits. Mendoza refused to sign the required authority to sell or special power of attorney unless Sime Darby paid him the amount ofP300. Sime Darby found an interested buyer of the club share for P1. the sale did not push through and Sime Darby was compelled to return the payment to the prospective buyer.

Manila Golf and Country Club. Sime Darby failed to give some of his retirement benefits amounting to P300. (2) Sime Darby allowed him to personally choose the share that he liked as part of his benefits. Thereafter. who testified that she asked Mendoza to endorse ACC Stock Certificate No. (2) Ranel A. trial on the merits ensued.000. Sime Darby’s Treasurer since 1998. (4) though he retired in 1995. Villar. the same employee of ACC who also testified for Sime Darby. Javier. Mendoza filed a separate Opposition to Sime Darby’s application for restraining order and preliminary injunction stating that there was no showing of grave and irreparable injury warranting the relief demanded. who confirmed that the club share could not be sold to a corporation like Sime Darby. On 13 March 2006. ACC’s Membership Department Supervisor. who testified that Mendoza refused to give Sime Darby his authorization to sell the club share unless he was paid P300. In his testimony. Sime Darby regularly paid for the monthly dues and other assessments on the ACC Class "A" club share. who testified that the club share was registered under the name of Mendoza since ACC’s By-Laws prohibits juridical persons from acquiring a club share and attested that Sime Darby paid for the monthly dues of the share since it was purchased in 1987. Sime Darby added that during Mendoza’s employment with the company until his retirement in April 1995. Mendoza resumed using the facilities and privileges of ACC. On 3 January 2006. the RTC denied Sime Darby’s prayer for restraining order and preliminary injunction. he had to personally undergo an interview with regard to his background and not the company’s. pending the hearing on the issuance of a writ of preliminary injunction. On the other hand. Further. Wack Wack Golf Club. and Baguio Golf and Country Club.various club memberships.000 as additional retirement benefit and that Sime Darby was compelled to institute the case and incurred legal expenses of P200. as required by Sime Darby. Mendoza testified that (1) he owns the disputed club share. and (3) Ira F. Mendoza also alleged that when he retired in 1995. Quezon City Sports Club. Makati Sports Club. i. Sime Darby then filed a Motion for Summary Judgment explaining that a trial was no longer necessary since there was no issue as to any material fact. Sime Darby’s VicePresident for Legal Affairs and Corporate Secretary. Thus. On 15 November 2005. Mendoza admitted endorsing in blank the stock certificate covering the club share and signing a blank assignment of rights only for the purpose of securing Sime Darby’s right of first refusal in case he decides to sell the club share.e. A-1880 at the back and to sign the assignment of rights.000. Ronald E. Mendoza presented two witnesses: (1) himself. (3) as a condition for membership in ACC. and (2) Ranel Villar. enjoining Mendoza from availing of the club’s facilities and privileges as if he is the owner of the club share. Mendoza filed an Answer alleging ownership of the club share. Mendoza stated that Sime Darby purchased the Class "A" club share and placed it under his name as part of his employee benefits and bonus for past exemplary service. Despite having retired from Sime Darby for less than 10 years and long after the employment contract of Mendoza with the company has been severed. Sime Darby prayed that a restraining order be issued. to the damage and prejudice of Sime Darby. he only started paying . Sime Darby presented three witnesses: (1) Atty. the trial court denied the motion. Sime Darby alleged that Mendoza sent a letter11 dated 9 August 2004 to ACC and requested all billings effective September 2004 be sent to his personal address. Cascon.

Mendoza. the appealed decision of the Regional Trial Court is REVERSED and SET ASIDE.000. Grounds for issuance of preliminary injunction. Sime Darby’s representative. Section 3. from making use of Stock Certificate No. SO ORDERED. The dispositive portion states: WHEREFORE. the Complaint in Civil Case No. its former employee.00 as attorney’s fees and litigation expenses.00 as temperate damages. the trial court rendered a Decision in favor of Sime Darby. – A preliminary injunction may be granted when it is established: . On 30 March 2012. the instant petition.000. premises considered.14 Sime Darby filed a Motion for Reconsideration which the Court of Appeals denied in a Resolution15 dated 6 June 2012. The dispositive portion of the Decision states: WHEREFORE. he met with Atty. judgment is hereby rendered enjoining defendant Jesus B. and ordering defendant Jesus B.the club share dues in 2004 because after his retirement. SO ORDERED. On 30 April 2007. (5) in May 2004.13 The appellate court ruled that Sime Darby failed to prove that it has a clear and unmistakable right over the club share of ACC.12 Mendoza filed an appeal with the Court of Appeals. he migrated to the United States until he came back in 1999 and since then he had been going back and forth to the United States. Inc.. to discuss the supposed selling of the club share which he refused since there were still unpaid retirement benefits due him. The Court’s Ruling The petition has merit. 1880 of the Alabang Golf and Country Club. Hence. Resultantly. 3. Javier. Ronald E. and (2) whether the appellate court erred in declaring that Mendoza is the owner of the club share. which provides for the grounds for the issuance of a preliminary injunction. states: SEC. in view of all the foregoing. 05821. Mendoza to pay the plaintiff P100. The Issues The issues for our resolution are: (1) whether Sime Darby is entitled to damages and injunctive relief against Mendoza. is hereby DISMISSED. Rule 58 of the Rules of Court. the appellate court reversed the ruling of the trial court. and P250. and (6) ACC recognizes him as the owner of the club share.

16 we held that the purpose of a preliminary injunction is to prevent threatened or continuous irremediable injury to some of the parties before their claims can be thoroughly studied and adjudicated. some act or acts probably in violation of the rights of the applicant respecting the subject of the action or proceeding. (3) that there is an urgent and permanent act and urgent necessity for the writ to prevent serious damage. at Mendoza’s cross-examination. Also. and the whole or part of such relief consists in restraining the commission or continuance of the act or acts complained of. Its sole aim is to preserve the status quo until the merits of the case can be heard fully. Being a corporation which is expressly disallowed by ACC’s By-Laws to acquire and register the club share under its name. in connection with the application for membership. is entitled to club membership benefit of the Company. and turning it over to Sime Darby. Sime Darby had the share registered under the name of respondent Mendoza. and tending to render the judgment ineffectual. (b) That the commission.. these circumstances show that there existed a trust relationship between the parties. In the present case. petitioner Sime Darby has sufficiently established its right over the subject club share. either for a limited period or perpetually. In Medina v. Sime Darby placed its name in full as the owner of the share and Mendoza as the assignee of the club share. or (c) That a party. Sime Darby’s former sales manager. Such fact was clearly proved when in the application form17 dated 17 July 1987 of the ACC for the purchase of the club share.19 Further. threatening or is attempting to do. or is procuring or suffering to be done. under a trust arrangement." Even during the trial. to be entitled to an injunctive writ. Sime Darby presented evidence that it acquired the Class "A" club share of ACC in 1987 through a Deed of Sale. he did not refute Sime Darby’s ownership of the club share as well as Sime Darby’s payment of the monthly billings from the time the share was purchased. (2) a violation of that right. Mendoza admitted signing the club share certificate and the assignment of rights. court. Thus. Clearly.(a) That the applicant is entitled to the relief demanded. Sime Darby sent a letter18 dated 17 September 1987 addressed to ACC confirming that "Mendoza. as Sime Darby’s Sales Manager. Mendoza identified his signature over the printed words "name of assignee" as his own and when confronted with his Reply-Affidavit. Greenfield Development Corp. agency or a person is doing. or in requiring the performance of an act or acts. Sime Darby has the burden of establishing the following requisites: (1) a right in esse or a clear and unmistakable right to be protected. . both in blank. continuance or non-performance of the act or acts complained of during the litigation would probably work injustice to the applicant.

was extended the privilege of availing a club membership. While Sime Darby paid for the purchase price of the club share. A right of first refusal. Mendoza’s contention of the right of first refusal is a self-serving statement. Mendoza tried to appropriate the club share and demanded from ACC that he be recognized as the true owner of the share as the named member in the stock certificate as well as in the annual report issued by ACC. Court of Appeals. Javier of Sime Darby’s plan to sell the share to an interested buyer. The burden then shifts to the transferee to show otherwise. because of the presumption that he who pays for a thing intends a beneficial interest for himself. claimed that he only signed the assignment of rights in blank in order to give Sime Darby the right of first refusal in case he decides to sell the share later on. the following requisites must be present: (a) invasion of the right sought to be protected is material and substantial. The company merely wanted Mendoza to hold the share in trust since Sime Darby. the circumstances which occurred after the purchase of the club share point to the opposite. Thus. Sime Darby properly sought injunction in this case.20 we held that a trust arises in favor of one who pays the purchase price of a property in the name of another. Mendoza signed the share certificate and assignment of rights both in blank.While the share was bought by Sime Darby and placed under the name of Mendoza. Third.1âwphi1 At the same time. Ronald E. In Thomson v. In fact. It can be gathered then that Sime Darby did not intend to give up its beneficial interest and right over the share. cannot register a club share in its own name under the rules of the ACC. First. Last.000 allegedly representing his unpaid retirement benefit. Mendoza continued to do so. as a corporation. as generously practiced by Sime Darby. the monthly bills were regularly sent to Sime Darby’s business address until Mendoza requested in August 2004. or the use and enjoyment of the club’s facilities and privileges while employed with the company. long after he retired from the employ of the company. Mendoza turned over possession of the documents to Sime Darby. However. However. in order to prevent further damage and prejudice to itself. Mendoza. In August 2004. Mendoza refused to give an authorization to sell the club share unless he was paid P300. Mendoza was given the legal title. He did not present any document to show that there was such an agreement between him and the company. his title is only limited to the usufruct. would mean that Sime Darby has a right to match the purchase price offer of Mendoza’s prospective buyer of the club share and Sime Darby may buy back the share at that price. as a senior manager of the company. from the time the share was purchased in 1987 until 1995. since 1987. Mendoza. Thus. not even an acknowledgment from Sime Darby that it actually intended the club share to be given to him as a reward for his performance and past service. As correctly observed by the RTC in its Decision dated 30 April 2007: In order for a writ of preliminary injunction to issue. Second. Despite being informed by Sime Darby to stop using the facilities and privileges of the club share. as the transferee. in this case. that such bills be forwarded to his personal address starting September 2004. a resulting trust is presumed as a matter of law. (b) . Mendoza violated Sime Darby’s beneficial interest and right over the club share after he was informed by Atty. Sime Darby paid for the monthly bills pertaining to the share.

Sime Darby may choose to dispose of the club share in any manner it sees fit without undue interference from Mendoza. the Court deems it proper to impose upon the defendant P100. There is a presumption that the share was bought for the use of the defendant while the latter is still connected with the plaintiff. Sime Darby has the right to be protected from Mendoza's act of using the facilities and privileges of ACC.000 to the buyer. Thirdly. it has three years to convey its property and close its affairs as a body corporate under the Corporation Code. Plaintiff bought the subject share in 1987.000. it has interest and right over it. Hence. plaintiff is entitled to its prayer for injunction. plaintiff claimed for temperate or moderate damages. Since the records show that Sime Darby was dissolved on 31 December 2011. Thus. who lost his right to use the club share when he retired from the company. With this. As the purchaser of the share. This is because when the share was registered under the name of defendant. xxxx In the present case. the latter signed the stock certificate in blank as well as the deed of assignment and placed the certificate under the possession of the plaintiff. rather it intended to have the share held in trust by defendant. plaintiff did not intend to relinquish its interest and right over the subject. plaintiff’s payments of monthly billings of the subject share bolster defendant possession in trust rather than his ownership over the share.000 as temperate damages. and (c) there is an urgent and paramount necessity for the writ to prevent serious damage. plaintiff having established its right to the relief being claimed and inasmuch as it was constrained to litigate in order to protect its interest as well as incurred litigation expenses. we grant the damages and injunctive relief sought by Sime Darby. and with plaintiff’s demand upon the defendant to desist from making use of the club facilities having been ignored. With this. attorney's fees are hereby awarded in the amount of P250. as the true owner of the ACC Class "A" club share.21 In sum.the right of the complainant is clear and unmistakable. This can be inferred from plaintiff’s witness’ testimony that plaintiff required the defendant to sign the said documents so that the plaintiff can be assured that its ownership of the property is properly documented. xxxx As to the second issue. Additionally. until a new grantee is named. clearly defendant violated plaintiff’s right over the use and enjoyment thereof.100. plaintiff was forced to return the amount of P1. it was established that sometime in July 2004. . Further. All the elements are present in the instant case. Hence. With defendant’s continued use of the subject share despite that he is not anymore connected with plaintiff. The twin requirements of a valid injunction are the existence of a right and its actual or threatened violations. plaintiff tried to sell the share but defendant refused to give the authority. the right of plaintiff over the share is clear and unmistakable.22 Thus. plaintiff cannot make use of the facilities of the club because defendant insists on enjoying it despite the fact that he is no longer connected with the plaintiff.

SO ORDERED. CV No. 89178.WHEREFORE. Branch 132 in Civil Case No. We REINSTATE the 30 April 2007 Decision of the Regional Trial Court of Makati City. 05-821. we GRANT the petition. . We SET ASIDE the 30 March 20 I 2 Decision and 6 June 2012 Resolution of the Court of Appeals in CA-G.R.

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