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

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.(2) the costs of suit. Inc. 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. 2002 with interest at one percent ( 1 o/o) per month from May 16. commenced or concluded its actual foreclosure." Certainly. 2002 as the base amount. As there was no seizure that transpired.R. the vehicle subject matter of this case was never recovered and delivered to respondent despite the issuance of a writ of replevin. to be reckoned from May 16. iniquitous.1âwphi1 All the foregoing notwithstanding. and exorbitant. unconscionable.31 While Central Bank Circular No. SO ORDERED. 2008 Resolution of the Court of Appeals in CA-G. ( 1) the remaining outstanding balance of their auto loan obligation as of May 15. Plaintiff further prays for such other relief as this Honorable Court may deem just and equitable in the premises. it is as if there was no express contract on said interest rate. 2002 until full payment and with the remaining outstanding balance of their car loan as of May 15. CV No. and (2) costs of suit. respondent BPI Family Savings Bank. therefore. 1983.29 Compared with Elisco. the petition is DENIED and the Court AFFIRMS WITH MODIFICATION the April 30. 2002 until fully paid. regardless of maturity. the interest rate may be reduced as reason and equity demand. which is equivalent to the remedy of "exacting fulfillment of the obligation. if not against the law. The trial court. 86021. rightfully granted the alternative prayer for sum of money. which took effect on January 1. 905-82. Petitioners spouses Deo Agner and Maricon Agner are ORDERED to pay. . thus. 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. jointly and severally. it cannot be said that petitioners were deprived of the use and enjoyment of the mortgaged vehicle or that respondent pursued.33 WHEREFORE. there is no double recovery or unjust enrichment30 to speak of. 2007 Decision and May 19.32 Since the stipulation on the interest rate is void for being contrary to morals. effectively removed the ceiling on interest rates for both secured and unsecured loans.

2003 Decision3 of the Regional Trial Court (RTC) of Malaybalay City.6 Factual Antecedents On March 23.000. Branch 9 in Civil Case No. LOPEZ and ROWENA GAY T. vs. 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. petitioners filed a Complaint7 for declaration of nullity ab initio of sale. 2006 Resolution4 denying petitioner-spouses Delfin O.9 that on July 23. petitioners alleged that they are the owners of a parcel of land located in Sumpong. Rowena Gay T. for these fraudulent . and that. and recovery of ownership and possession of land with the RTC of Malaybalay City. Bukidnon covered by Transfer Certificate of Title (TCT) No. which reversed the January 6. that petitioner Aurora is the sister of Reynalda Visitacion (Reynalda). 2759-98. the seller retains ownership of the property until the buyer has paid the price in full. GRACE JULIE ANN TUMIBAY MANUEL. In their Complaint. The case was raffled to Branch 9 and docketed as Civil Case No. 1998.00. CV No. legal representative. Malaybalay. TUMIBAY-deceased. The Petition for Review on Certiorari1 assails the May 19. remained a Filipino citizen. Reynalda sold the subject land to her daughter. Tumibay and Aurora5 T. VISITACION LOPEZ. No. TUMIBAY and AURORA T. that they are natural born Filipino citizens but petitioner Delfin acquired American citizenship while his wife. 79029. petitioner Aurora. DECISION DEL CASTILLO.171692 June 3.Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.: In a contract to sell. 2759-98. Tumibay’s Motion for Reconsideration. that the subject sale was done without the knowledge and consent of petitioners. and the February 10.000. SPOUSES MELVIN A.R. Visitacion Lopez (respondent Rowena). through a deed of sale10 for an unconscionable amount of P95.R. 1997.00 although said property had a market value of more than P2.000. J. 2013 SPOUSES DELFIN O. Petitioners. 2005 Decision2 of the Court of Appeals (CA) in CA-G. Respondents. T-253348 (subject land) in the name of petitioner Aurora.

in furtherance of the agreement. 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. to execute a Deed of Reconveyance in favor of the petitioners. that sometime in 1994. . that on January 25.acts. respondent Rowena. acting with evident bad faith. executed the deed of sale in her favor but placed it in the name of her daughter. as follows. (1) Ordering the petitioners. Decision is hereby rendered. the RTC rendered a Decision in favor of petitioners. On May 19. (2) the subject land be reconveyed to petitioners. that the subject sale was done with the knowledge and consent of the petitioners as evidenced by the receipt of payment by petitioners. (3) Ordering respondents. and (3) respondents be ordered to pay damages.00 to be paid on installment. jointly and severally. a deed of sale was executed and the corresponding title was issued in favor of respondent Rowena. 1998. Respondents prayed that the Complaint be dismissed and that petitioners be ordered to pay damages. the Clerk of Court of the RTC and ex-officio Provincial Sheriff to execute such Deed of Reconveyance. (2) Ordering the Register of Deeds of Bukidnon to cancel TCT No.000. 1997 be declared void ab initio. viz: WHEREFORE. On May 25. Ruling of the Regional Trial Court On January 6. and that petitioners should be held liable for damages for filing the subject Complaint in bad faith. or if said respondents should refuse to do so or are unable to do so. petitioners filed an Answer to Counterclaim. which sale is null and void because an agent cannot purchase for herself the property subject of the agency. respondent Rowena paid the monthly installments thereon as evidenced by money orders. to return the said amount of $12.13 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. 2003. respondent Rowena paid in cash to petitioners the sum of $1. respondent Rowena and petitioners agreed that the former would buy the subject land for the price of P800.000. Petitioners prayed that (1) the deed of sale dated July 23. respondents filed their Answer11 with counterclaim. T-62674 in the name of the respondent Rowena Gay T.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. spouses Melvin and Rowena Gay Lopez.000. respondents should be held liable for damages. 1998. that from 1995 to 1997. that. 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. 1995. and that Reynalda. 1990. Visitacion-Lopez and to issue a new TCT in the name of the petitioners.00. Respondents averred that on December 12.

premises considered. 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. acted outside the scope of her authority under the SPA. through fraud and with bad faith. thus. the CA rendered the assailed Decision reversing the judgment of the trial court. (2) although there is no direct evidence of petitioners’ approval of the selling price of the subject land. the appealed Decision of the Court a quo is hereby REVERSED and SET ASIDE.17 In reversing the trial court’s Decision. In its January 14. SO ORDERED.(4) No x x x damages are awarded. Thus. Petitioners filed a partial motion for reconsideration15 praying for the award of attorney’s fees.00) to the petitioners effective within 30 days from receipt of this Decision and in case of delay. The latter and her spouse MELVIN LOPEZ are directed to pay the balance of Four Hundred Eighty Eight Thousand Pesos (P488.00 in favor of respondents was without interest because there was also no award of rental income in favor of petitioners. and. the appellate court ruled that: (1) the SPA sufficiently conferred on Reynalda the authority to sell the subject land.000. Ruling of the Court of Appeals On May 19.14 In ruling in favor of petitioners. The respective parties must bear their own expenses except that respondents. Accordingly. petitioners should. The trial court held that Reynalda. to pay the legal rate of interests [sic] at 12% per annum until fully paid. The trial court further ruled that petitioners are not entirely free from liability because they received from respondent Rowena deposits totaling $12. viz: WHEREFORE. respondents appealed to the CA.000. without first seeking the approval of petitioners as to the selling price thereof. must pay the costs of this suit. . jointly and severally. From this Decision. connived with her daughter. Both parties are deemed mutually compensated and must bear their own expenses. (4) Reynalda. be ordered to reimburse the same without interest. 2003 Order16 denying the aforesaid motion. title to the subject property shall remain in the name of the Appellant ROWENA GAY VISITACION-LOPEZ. the sale is null and void and the subject land should be reconveyed to petitioners. the trial court clarified that the reimbursement of $12. respondent Rowena. (5) the sale contravenes Article 1491. Under the principle of unjust enrichment.00. (3) the SPA does not sufficiently confer on Reynalda the authority to sell the subject land. SO ORDERED. as agent. respondent Rowena. 2005. 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. to sell the subject land to the latter. paragraph 2. (2) Reynalda violated the terms of the SPA when she sold the subject land to her daughter.

Whether the CA erred in adopting the testimony of respondent Rowena as to the P800.000. The money.00 selling price was already received by petitioners. 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. Even assuming that she had the power to sell the subject land under the SPA.00. she did not secure the . (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.000.000. Thus. respondents are only liable for the balance ofP488. Whether the CA erred in resolving the issue in the case at bar. 1997 for being executed by Reynalda beyond the scope of her authority under the SPA. (6) the selling price of P800. Further.000. Hence. II. IV. Whether the CA erred in not declaring the sale void on grounds of public policy.00.000.00 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.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 23.000.00 selling price of the subject land. (3) petitioners are estopped from repudiating the sale after they had received the deposits totaling $12. in cash and checks.00 of the P800. and.00 per dollar.000. 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. III. Considering that respondent Rowena proved that she remitted a total of $12. Issues Petitioners raise the following issues for our resolution: I. (5) petitioners impliedly ratified the subject SPA and contract of sale as well as its effects. 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. the appellate court ruled that P312.00 to petitioners and pegging the exchange rate at that time at P26. Moreover. Whether under the SPA Reynalda had the power to sell the subject land.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. this Petition. given to petitioners from 1995 to 1997 were mere deposits until the parties could agree to the purchase price. V.

TCT No. as a dummy to acquire the subject land. 1995.19 Our review of the records leads us to conclude that the following are the relevant factual antecedents of this case. to. 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. we do not disturb the factual findings of the appellate court. respondent Rowena.000. 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. as principals and sellers. 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. respondent Rowena paid the first monthly installment of $1. executed an SPA in favor of Reynalda.000. offer for sale the subject land provided that the purchase price thereof should be approved by the former. petitioners question the determination by the appellate court that the fair market value of the subject land is P800. as seller. Reynalda. 62674. respondent Rowena called her mother. while respondent Rowena appeared as buyer. 1997 without the knowledge and consent of petitioners. the appellate court properly ruled on the former. 1997. Sometime in 1997.00 for lack of any factual and legal basis. hence. Reynalda appeared and signed as attorney-in-fact of petitioner Aurora. petitioners and respondent Rowena agreed to enter into an oral contract to sell over the subject land for the price of P800. petitioners. Furthermore. . Reynalda merely used her daughter. In the aforesaid deed. among others.00. However. 1990. Reynalda then transferred the title to the subject land in respondent Rowena’s name through a deed of sale dated July 23. hence. Our Ruling The Petition is meritorious. claiming that she had already bought the subject land from petitioners. 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. after having paid a total of $10. the sale is null and void. Sometime in 1994.e. Petitioners were the owners of the subject land covered by TCT No.000. After which. i. a new title. As a general rule. Finally.approval as to the price from petitioners before executing the subject deed of sale.00 spanning almost three years.. as agent. Here. Using the aforesaid SPA. this case falls under one of the recognized exceptions thereto because the factual findings of the trial court and appellate court are conflicting.000.20 to thesubject land was issued in the name of respondent Rowena. On December 12. 1997 is valid.00 as consideration for the subject land.00 to be paid in 10 years through monthly installments. They emphasize that petitioners received a total of $12. T-25334 in the name of petitioner Aurora.00 to petitioner Aurora which was followed by 22 intermittent monthly installments of $500. On January 25.000.

the date of the last monthly installment). Petitioners do not deny that they received 23 monthly installments over the span of almost three years. the payments already totaled $12. 1996 June 30. First. 1995 February 21.00 500.000. 1997 February 28. 1996 500.00 500.We explain these factual findings and the consequences thereof below.00 500.00 500.00 500. the payment of monthly installments was duly established by the evidence on record consisting of money orders21 and checks22 payable to petitioner Aurora.00.00 500. 1995 June 30. 1996 July 31.00 payable in 10 years through monthly installments.00 . As of November 30.0023 500.00 500. 1995 May 29. We are inclined to give credence to the claim of the respondents for the following reasons. 1995 July 31.00 500.00 September 30.000. Petitioners and respondent Rowena entered into a contract to sell over the subject land. 1995 April 25.e.000.00 500.00 500. 1995 March 27. 1996 August 31.00 500.00 500. 1996 January 31. 1997 March 31. 1996 October 29.00 500. 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. to wit: Date January 25. 1995 June 1.00 500. Petitioners deny that they agreed to sell the subject land to respondent Rowena for the price of P800.. 1997 (i. 1997 Amount Paid (in dollars) 1. 1996 December 31.

1997 August 31. 1997 500. We are.28 (2) after this initial payment. 1997 Total 500.00 12."25 In a contract to sell. A contract to sell has been defined as "a bilateral contract whereby the prospective seller.00. 1997 July 19. binds himself to sell the said property exclusively to the prospective buyer upon fulfillment of the condition agreed upon. and. respondent Rowena admitted that she had the title to the subject land transferred in her name only later on or on July 23. full payment of the purchase price. she thereafter accepted from respondent Rowena 22 intermittent monthly installments in the amount of $500.29 and that she was entitled thereto as a form of security for the installments she had already paid.00 Second.000. thus. petitioners received 22 intermittent monthly installments from respondent Rowena in the sum of $500. inclined to rule that there was."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.00.00 November 30.00 September 30. in the name of respondent Rowena prior to or at the time of the first payment of $1. 1997 500.00 500. to wit: (1) the title to the subject land was not immediately transferred. while there was no written agreement evincing the intention of the parties to enter into a contract to sell. petitioner Aurora claimed that the $1.000. its existence and partial execution were sufficiently established by.00 by respondent Rowena to petitioner Aurora on January 25.00.000. indeed. Third. and may be reasonably inferred from the actuations of the parties.May 31. that is."27 In the case at bar. through a deed of sale.000. (3) in her testimony. "ownership is retained by the seller and is not to pass until the full payment of the price x x x.000. 1997 October 31.00 in cash that she received from respondent Rowena on January 25. 1995 was a mere deposit until the purchase price of the subject land would have been finally agreed upon by both parties. petitioner Aurora failed to explain why. because she believed that she had substantially paid the purchase price thereof. 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 ofP800.24 However. No attempt was made on the part of petitioners to return these amounts and it is fair to assume that petitioners benefited therefrom. 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.00 500. while expressly reserving the ownership of the subject property despite delivery thereof to the prospective buyer. 1995. through a formal deed of conveyance. 1997.00. in her testimony.30 . after receiving this initial sum of $1.00 500.

5850 26.00 500. we find that respondent Rowena was in breach thereof because.50 13.00 500.5750 25.00 500.2830 26.00 12.50 13.8040 25.2570 26.00 500. as of July 19.00 13.101.00 500. 1995 April 25.114.902.166. 1996 August 31.00 500.094.0270 25.00 14.50 Thus.000.00 13.128. 1996 October 29. the full price of the subject land was yet to be paid.574037 Total Peso Equivalent 24. 1997 July 19.7700 25.3330 26.50 or 32.00 500.00 500.983.770.00 260.50 13.00 500. 1997 February 28.187. we take judicial notice31 of the prevailing exchange rates at the time.50 12.792. 1997.172. 1997 or prior to the execution of the deed of sale dated July 23.202034 26. 1995 June 30. 1995 February 21.287. Although we rule that there was a contract to sell over the subject land between petitioners and respondent Rowena.00 500.288035 26.000. 1997.557.50 13. as published by the Bangko Sentral ng Pilipinas.00 12.00 500.144. 1997 Amount Paid (in dollars) 1.374036 28.00 500. viz: .00 500.1140 25. at the time the aforesaid deed of sale was executed on July 23.00 Exchange Rate (peso per dollar) 24.00 500.00 13.50 13.626. the total amount of monthly installments paid by respondent Rowena to petitioners was only P260.50 13.00 13.183. 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.141. 1996 June 30. 1996 July 31.32 and multiply the same with the monthly installments respondent Rowena paid to petitioners.Respondent Rowena was in breach of the contract to sell.00 500.50 13. 1995 June 1.101.787. 1997 March 31.00 500. to wit: Date January 25.203033 26.00 13.00 12. 1995 May 29.2280 26.00 purchase price. as supported by the evidence on record. 1997 May 31.9670 26. 1996 December 31.3440 26.58%38 of theP800.013.3670 26.50 12. 1996 September 30.00 500.00 500.1880 26. 1995 July 31. In arriving at this conclusion. 1995 March 27.626. 1996 January 31.

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. Q .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 . Reynalda. never sought the consent of petitioners prior to said transfer of title. In particular. your total payment did not reach x x x eight hundred thousand pesos? Is that correct? [sic] A .58% thereof.Let us make this clear. her own evidence clearly showed that she had. BARROSO: Q .000.My mother is equipped with the SPA to transfer the lot to me only for security purposes but actually there is no full payment.00 dollar to him (referring to petitioner Delfin)? A . respondent Rowena’s narration of the events leading to the transfer of title showed that she and her mother.00) in your possession now? A.Why is this check (in the amount of $1.Yes. paid only 32. OKIT: Q .This is the check I paid to her (referring to petitioner Aurora) which is in cash. what did you do with the land subject of this case? [sic] .Now did you continue x x x paying the $500. Now based on the dollar rate. 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. You now admit that x x x you agreed to buy the lot at eight hundred thousand.ATTY. However. Significantly. Verily. by that time. 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.Now having stated substantially paid. xxxx Q .Yes. viz: COURT: Q. 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. [sic] ATTY. to which the Plaintiff x x x agreed.

Then what transpired next? A . xxxx Q . [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.A . reasons. so she transferred the land to me. "rescission will not be permitted for a slight or casual breach of the contract. Article 1191 of the Civil Code provides: Art. He may also seek rescission even after he has chosen fulfillment. The court shall decree the rescission claimed. unless there be just cause authorizing the fixing of a period. The injured party may choose between fulfillment and the rescission of the obligation. 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 power to rescind obligations is implied in reciprocal ones. 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. The contract to sell is rescissible. we find that respondent Rowena’s act of transferring the title to the subject land in her name. in case one of the obligors should not comply with what is incumbent upon him. if the latter should become impossible. In fine. we previously noted."41 In the case at bar.After two years my mother called me if how much I have paid the land and being equipped with SPA. without the knowledge and consent of petitioners and despite non-payment of the full price thereof. 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 .Yes. It merely authorized Reynalda to sell the subject land at a price approved by petitioners. 1191. but only for such breaches as are substantial and fundamental as to defeat the object of the parties in making the agreement. as unjustified.And you called your mother? A .I called my mother who has equipped with SPA to my Uncle that I have already bought the land. As previously noted. x x x As a general rule. The terms of the SPA are clear. [sic] Q . with the payment of damages in either case. constitutes a substantial and fundamental breach of the contract to sell.

negligence.00. respectively. thus. incompatible with good faith. We.000. in the name of her mother and executed four years prior to the contract to sell.42 As a result. Fraud or malice (dolo) has been defined as a "conscious and intentional design to evade the normal fulfillment of existing obligations" and is. respondent Rowena’s aforesaid acts caused petitioners to incur expenses in litigating their just claims. considering that these acts betrayed in no small measure the trust reposed by petitioners in her and her mother.effects full payment therefor. 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. a buyer who willfully contravenes this fundamental object or purpose of the contract. and those who in any manner contravene the tenor thereof.00 and P50. Article 1170 of the Civil Code provides: Art. 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.45 Further.44 In the case at bar. as buyer. find respondent Rowena liable for moral damages and attorney’s fees which we fix at P100. or delay. we deplore petitioners’ lack of candor in prosecuting their claims before the trial . rule that petitioners are entitled to the rescission of the subject contract to sell. Her own testimony and documentary evidence established this fact. the seller’s obligation to convey and the buyer’s right toconveyance of the property arise only upon full payment of the price. respondent Rowena took advantage of the SPA. thus. should continue with the contract to sell even after the discovery of the aforesaid breach committed by respondent Rowena. We. 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. our review of the records leads us to conclude that respondent Rowena is entitled to the reimbursement of the same with legal interest. as sellers. Here. Where fraud and bad faith have been established. Although respondent Rowena was clearly unjustified in prematurely and covertly transferring the title to the subject land in her name. Reynalda. it would be highly iniquitous for us to rule that petitioners. 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. are liable for damages.000. and (2) she orchestrated the aforesaid transfer of title without the knowledge and consent of petitioners.43 Indeed. Those who in the performance of their obligations are guilty of fraud. thus. under Article 2208(2)46 of the Civil Code. commits a substantial and fundamental breach which entitles the seller to rescission of the contract. by covertly transferring the ownership of the property in his name at a time when the full purchase price has yet to be paid.47 Anent the monthly installments respondent Rowena paid to petitioners. the award of moral damages is proper.58% thereof) when she had the title to the subject land transferred to her name. Thus. 1170. Put simply.

166.2030 26.00 . be returned to her with legal interest.3440 26.00 500. 1996 October 29. 1995 April 25.0270 25.00 500.50 13.101.1140 25.5740 Peso Equivalent 24.2280 26.183.00 500. 1995 May 29.557. that this was brought to light to which petitioners readily admitted.5750 25.00 500.00 13. The records indicate that. 1996 January 31.50 13. The total amount to be reimbursed by petitioners to respondent Rowena is computed as follows: Date January 25.00 500.50 12.902.1880 26.101.983.00 13.3740 28.00 12.8040 25.00 500.2830 26.2020 26. 1996 July 31. 1997 July 19.00 13. 1996 August 31.50 13. thus.00 13.144.00 13.2880 26. 1996 December 31.000.50 12.114.00 14. 1995 June 1.court and intent to evade recognition of the monthly installments that they received from respondent Rowena.172.00 500.2570 26. when respondent Rowena presented the proof of payment of the monthly installments in her Answer to the Complaint. The Complaint merely alleged that the subject sale was done without the knowledge and consent of petitioners.00 500.50 13. 1997 May 31.128. 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. In view of the foregoing.50 13.7700 25.00 500.00 500.3670 26.287.00 500.00 12. 1995 February 21. Further.50 13. 1997 February 28.50 13.00 500.5850 26.3330 26. 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.00 500.141.094. 1997 Amount Paid (in dollars) 1.187. It was only later on. the sums paid by respondent Rowena as monthly installments to petitioners should. in their Complaint.00 500. 1995 July 31. 1996 June 30. 1996 September 30.787. 1995 June 30.00 12.00 500.013.00 500.792.00 Exchange Rate (peso per dollar) 24.9670 26.00 500.00 500. 1997 March 31.770. 1995 March 27.

50 Petitioners are. It will be recalled that on December 12. The SPA stated in part: That we spouses. we set the interest rate at 6% per annum computed from the time of the filing of the Answer48 to the Complaint on May 19.00 17. among others.327.1650 33. To offer for sale said properties. ordered to pay respondent Rowena the sum of P327.442. Bukidnon.9380 34.50 16. is void. widow.8730 34. 199849 until finality of judgement and thereafter at 12% per annum until fully paid in accordance with our ruling in Eastern Shipping Lines. petitioners. 1997 which was used to effect the aforesaid transfer of ownership. Court of Appeals. Town of Quezon.6550 Total 15. 1997 500.936. as principals and sellers. 1997.00 30. Paradise. (1) offer for sale the subject land to prospective buyers. Inc. 1998 until finality of judgment and thereafter of 12% per annum until fully paid. of legal age and presently residing at 36 Armstrong Drive. executed an SPA in favor of Reynalda.50 327. 1997 November 30. xxxx To sign all papers and documents on our behalf in a contract of sale x x x. Clark. As can be seen. to be our true and lawful Attorney-in-fact. of legal age and residing at Don Carlos. 1990. AURORA TUMIBAY and DELFIN TUMIBAY.50 17.442.00 with an interest of 6% per annum computed from May 19. Philippines. constitute and appoint REYNALDA VISITACION. 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.469. Maramag and Barrio of Kiburiao. 07066 name. effected through the deed of sale dated July 23. the SPA gave Reynalda the power and duty to. the selling price of which will be subject to our approval. Barrio of Bantaunon. for us and in our name. 1997 October 31. New Jersey. 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. as agent.00 500. thus. The sale of the subject land.00 Since this amount is neither a loan nor forbearance of money. v.August 31. Towns of Maramag.082.51. 1997 September 30. Town of Malaybalay. and (3) sign the contract of sale on behalf of petitioners upon .00 500.00 500. we now rule on the validity of the deed of sale dated July 23. (2) seek the approval of petitioners as to the selling price thereof.

September 30.00 which was not approved by the latter. Although the SPA was executed four years prior to the contract to sell. 1997. however. 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 P800.58% of the purchase price. it shall be void if the party with whom the agent contracted is aware of the limits of the powers granted by the principal.000. August 31. on behalf of petitioners. the agent is liable if he undertook to secure the principal’s ratification. In this case. It should be noted that. the appellate court seemed to rely on the four monthly installments (i. therefore. establish that petitioners ratified such sale. nonetheless. For her part. especially so in this case where respondent Rowena. which was intended to guarantee the full payment of the price under the contract to sell.000. As stated earlier.50.e. 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. as buyer. and the principal does not ratify the contract.000.locating a buyer willing and able to purchase the subject land at the price approved by petitioners. the principal’s ratification of the acts of the agent. However. the agreed price of P800. 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. and November 30. did not. may cure the defect in the contract entered into between the agent and a third person. Though not clearly stated in its Decision. The appellate court conceded that there was no evidence that respondents sought the approval of petitioners for the subject sale but it. it runs contrary to common human experience and reason that petitioners. would forego the reservation or retention of the ownership over the subject land. If the agent contracts in the name of the principal. exceeding the scope of his authority.262.52 Reynalda. as sellers. when Reynalda. as attorney-in-fact of petitioner Aurora. That petitioners continued to receive four monthly installments even after the premature titling of the subject land in the name of respondent Rowena. 1997. as previously discussed. Article 1898 of the Civil Code provides: Art. at a price of P95. there would have been no obstacle to its use by Reynalda had the ensuing sale been consummated according to its terms. done beyond the scope of the latter’s authority. 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. through the deed of sale dated July 23.00 (which may be treated as the approved price) was not yet fully paid because respondent Rowena at the time had paid only P260. We disagree. This seems to be the line of reasoning adopted by the appellate court in upholding the validity of the subject sale. Further. 1898. 1997.00.. signed the subject deed of sale dated July 23. 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. . had paid only 32. acted beyond the scope of her authority because she signed the subject deed of sale. under Article 1898 of the Civil Code. by itself. October 31. On the contrary.

and (3) petitioners did not ratify. the Petition is GRANTED. To rule otherwise would be to reward respondent Rowena for the fraud that she committed on petitioners. (2) respondent Rowena was aware of the limits of the authority of Reynalda under the SPA. CV No. WHEREFORE. 1997 in favor of respondent Rowena.In a contract to sell. 4. as buyer. 1998 until finality of this Decision.00 as attorney’s fees.1âwphi1 3. Branch 9 in Civil Case No. between petitioners.000. entitled to the reconveyance of the subject land.00 as moral damages andP50. The deed of sale dated July 23. as agent. and conveyed the subject land to respondent Rowena at a price not approved by petitioners. SO ORDERED. Respondent Rowena is ordered to pay petitioners the sum of P100. 1997 over the subject land. 2. without the knowledge and consent of petitioners. The May 19. Based on the foregoing. the acts of Reynalda. T-25334. The contract to sell over the subject land. therefore.442. find that petitioners’ claim that they did not ratify the subject sale. thus. as buyer. acted beyond the scope of her authority under the SPA when she executed the deed of sale dated July 23. as sellers. as principals and sellers. which was done without their knowledge and consent. covered by TCT No. we rule that (1) Reynalda. 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. T-62674 in the name of respondent Rowena and to reinstate TCT No. Petitioners are ordered to pay respondent Rowena the sum of P327.000. Under Article 1898 of the Civil Code. We. T-25334 in the name of petitioner Aurora. between petitioner Aurora. covered by TCT No. they shall pay legal interest thereon at the rate of 12% per annum until fully paid. . No costs. T-62674. 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. and respondent Rowena is declared void. impliedly or expressly. the sale is void and petitioners are. The January 6. 2005 Decision and February 10. 79029 are ANNULLED and SET ASIDE. is declared rescinded.00 with legal interest of 6% per annum from May 19. 2006 Resolution of the Court of Appeals in CA-G. 5. In case petitioners fail to pay the amount due upon finality of this Decision. and respondent Rowena. 2759-98 is REINSTATED and MODIFIED to read as follows: 1. The Register of Deeds of Malaybalay City is ordered to cancel TCT No. represented by Reynalda as her attorney-infact.R. 2003 Decision of the Regional Trial Court of Malaybalay City.

BDS 606-895 with a maturity date of March 22. 1985.000. thus. On December 22. Respondent.Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G. Petitioners executed a Deed of Real Estate Mortgage6 in favor of respondent bank covering petitioners' property under Transfer Certificate of Title (TCT) No. Mallari (Florentino) obtained from respondent Prudential Bank-Tarlac Branch (respondent bank). a penalty and collection charges of 12% p. petitioners spouses Florentino and Aurea Mallari (petitioners) obtained again from respondent bank another loan of P1. but not less than P200.00 as evidenced by Promissory Note (PN) No. The loan had a maturity date of January 10.294. 1984. and penalty and collection charges of 12% p. 1992. 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.a. 2010 and the Resolution2 dated July 20. 1990. BDS 606-89.00. PRUDENTIAL BANK (now BANK OF THE PHILIPPINE ISLANDS).82 for PN No.a. attorney's fees equivalent to 15% of the total amount due but not less than P200.00 and. but was renewed up to February 17. 1989. Petitioners failed to settle their loan obligations with respondent bank.a. the latter. They stipulated that the loan will bear 23% interest p. 2013 SPOUSES FLORENTINO T. BD 84-055. 65993. Petitioners. MALLARI. J. a loan in the amount of P300. DECISION PERALTA.00. BD 84-055 and P2.218. No. assailing the Decision1 dated June 17. through its lawyer.3 Under the promissory note.a.R.000.R.54 for PN No. of the total amount due. 2011 of the Court of Appeals (CA) in CA-G.).a. MALLARI and AUREA V. of the total amount due. vs.991. the loan was subject to an interest rate of 21% per annum (p. amounted to P571. sent a demand letter to the former for them to pay their obligations.: Before us is a Petition for Review on Certiorari under Rule 45. The antecedent facts are as follows: On December 11. petitioner Florentino T. . CV No. which when computed up to January 31. in case of default.. attorney's fees equivalent to 15% p.7 million as evidenced by PN No. T-215175 of the Register of Deeds of Tarlac to answer for the said loan. 197861 June 5. 1985.

petitioners filed a complaint for annulment of mortgage.00 loan.00. 1992. the loan of P300. 1993. 1992 provided for a computation of interest and penalty charges only from May 26. 1993. . 1992. On July 7.000.000. 1989.500. (2) respondent bank still added theP300.171. a petition for the extrajudicial foreclosure of petitioners' mortgaged property for the satisfaction of the latter's obligation ofP1. Respondent bank filed its Answer with counterclaim arguing that: (1) the interest rates were clearly provided in the promissory notes.00 loan covered by another PN No. that: (1) the P300. temporary restraining order and damages claiming. Petitioners asked the court to restrain respondent bank from proceeding with the scheduled foreclosure sale.18.043.7 million covered by PN No. the RTC denied the Application for a Writ of Preliminary Injunction.00 secured by such mortgage.00 was increased to P594.00 loan was already P3. and not the P300.000. 1993. 84-055. injunction. deeds. 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. Respondent bank filed its Motion to Lift Restraining Order. 1992. 1992. 1992. thus.12 On November 19.000.e. 284051 had already been assigned to respondent bank. Respondent bank also claimed that petitioners were fully apprised of the bank's terms and conditions.7 million loan obligation for purposes of applying the proceeds of the auction sale.000. because the time deposit with the same amount under Certificate of Time Deposit No. the RTC issued its Order13 denying respondent bank's Motion to Dismiss Complaint.7 On April 10. a Certificate of Sale was issued to respondent bank being the highest bidder in the amount ofP3. 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. among others. 1992.. the RTC reversed itself and issued the restraining order in its Order9 dated January 14. which the RTC granted in its Order10 dated March 9. while the P1. Respondent bank then proceeded with the extrajudicial foreclosure of the mortgaged property.000. since the proceeds of petitioners' time deposit was applied to the payment of interest and penalty charges for the preceding period.On February 25. petitioners' time deposit was made to apply for the payment of interest of their P300.00 loan to the P1. (2) as early as January 1986. which were used in computing for interest charges. BDS 606-89 and the real estate mortgage. and (3) the statement of account as of April 10.700. respondent bank filed with the Regional Trial Court (RTC) of Tarlac. On April 20. and that the extrajudicial foreclosure was sought for the satisfaction of the second loan in the amount of P1. 1998.000. preliminary injunction.836. However.00 loan obligation should have been considered paid.700.54. Subsequently.000. In an Order8 dated November 10. respondent bank filed a Motion to Dismiss Complaint11 for failure to prosecute action for unreasonable length of time to which petitioners filed their Opposition. the auction sale was set by the Provincial Sheriff on April 23. i. respondent bank's Assistant Manager sent petitioners two (2) separate Statements of Account as of April 23.

respondent bank filed a Demurrer to Evidence. which was then the prevailing loan rate of interest could not be considered unconscionable.000. if the loan was unpaid. since petitioners had not paid any single centavo of the P1. after the restraining order was lifted.5 million as of the auction sale. It also found that Article 1229 of the Civil Code invoked by petitioners for the reduction of the interest was not applicable.00 as penalty charges was unjust and without basis.00 loan to the P1.. but the certificate of sale was executed by the sheriff only on July 7. which maturity coincided with petitioners' loan maturity.171. Thus.82 as of January 31.00 loan.Trial thereafter ensued. the amount of P292. NO COSTS. it had reached the amount of P3.5 million. On November 15. Petitioners appealed the RTC decision to the CA. However.294. Considering there is no evidence of bad faith.00 loan. 1993 added to the loan already amounted to P3.000. 1993. The RTC found no legal basis for petitioners' claim that since the total obligation was P1. 1992.000.7 million and respondent bank's bid price was P3. the stipulated interest and penalty charges from January 31.00 in favor of respondent bank. this case is hereby ordered DISMISSED. the dispositive portion of which reads: . 1985. the RTC issued its Order14 granting respondent's demurrer to evidence.15 The RTC found that as to the P300.991. It found that since petitioners' obligation had reached P2. As to the P1.836. 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. A Comment was filed by respondent bank and petitioners filed their Reply thereto. respondent bank should had just applied the time deposit to the loan. petitioners had assigned petitioner Florentino's time deposit in the amount of P300. respondent bank did not add the P300. which was later extended to February 17. SO ORDERED.043. the dispositive portion of which reads: WHEREFORE.7 million loan obligation for purposes of applying the proceeds of the auction sale. Subsequently. 1992 to July 7.000. the CA issued its assailed Decision. and allowed the loan interest to accumulate reaching the amount of P594. 2010. the latter should return to petitioners the difference of P1.a.600. which was computed based on the 23% interest rate and 12% penalty charge agreed upon by the parties. On June 17. and that contrary to petitioners' claim.54 as of April 10. 1992.18 per Statement of Account dated April 27. The RTC found that the 23% interest rate p.7 million loan which petitioners obtained from respondent bank after the P300. 1999. Petitioner Florentino was presented as the lone witness for the plaintiffs.7 million loan which showed they had not complied with any part of the obligation. hence.8 million. 1993. respondent bank did not. since banks are not hospitable or equitable institutions but are entities formed primarily for profit.

interest rate and the 12% p..00 loan excessive. in Civil Case No. terms and conditions as they may deem convenient.000. In Toring v. Parties are free to enter into agreements and stipulate as to the terms and conditions of their contract. good customs. since such contract is the law between the parties. provided they are not contrary to law.22 the stipulated interest rates involved were 3% and 3. the outstanding balance of petitioners' loan was P594.a. found that the interest rates and penalty charges imposed were not unconscionable and adopted in toto the findings of the RTC on the matter.a.a. the instant appeal is hereby DENIED. interest rate on the P1.00 and would not be sufficient to cover the interest.a. 1999.WHEREFORE.20 We are not persuaded. Spouses Ganzon-Olan. TARLAC CITY. which are equivalent to 84% and 60% p.000. In Medel v. Spouses Ganzon-Olan. or a 5. Timan.16 The CA found that the time deposit of P300. collection charges and attorney's fees agreed upon.7 million loan. which the CA denied in a Resolution dated July 20. but such freedom is not absolute. penalty.23 where the stipulated interest rates were 7% and 5% a month. DATED NOVEMBER 15. in the Statement of Account dated April 10. we had reduced the same to 1% per month or 12% p. public order. petitioners now contend that the interest rate of 23% p. likewise. morals. 7550 is hereby AFFIRMED. Petitioners filed their Motion for Reconsideration.000.19 and Chua v. the parties thereto are bound to comply with them. Timan. contrary to morals if not against the law and declared such stipulation void. In this case. unconscionable and exorbitant. clauses." Hence. hence. penalty charge on petitioners'P1. Branch 64. thus.043.a. "The contracting parties may establish such stipulations. petitioners and respondent bank agreed upon on a 23% p.700. 1999 issued by the Regional Trial Court (RTC). The CA. As Article 1306 of the Civil Code provides.5% per month on aP500. or public policy. Hence. COURT OF APPEALS ERRED IN AFFIRMING THE ORDER OF THE RTCBRANCH 64. DESPITE THE FACT THAT THE SAME IS CONTRARY TO SETTLED JURISPRUDENCE ON THE MATTER.17 The issue for resolution is whether the 23% p.00 was equivalent only to the principal amount of the loan ofP300. We said that we . 1992. Tarlac City. if the stipulations in the contract are valid.000.81% per month on a P10 million loan.21 we found the stipulated interest rate of 66% p. Court of Appeals.00 loan was added to the P1.00 loan to which they agreed upon is excessive or unconscionable under the circumstances.54.a. It also found not persuasive petitioners' claim that the P300. 2011. which we find under the circumstances excessive and reduced the same to 1% per month. While in Chua v.a. Court of Appeals. invoking our ruling in Medel v. petitioners filed this petition for review arguing that: THE HON.7 million loan.000. However. respectively.18 Toring v. The Order dated November 15. imposed by respondent bank is excessive or unconscionable.

Also referred to as a penalty clause. Banco Filipino Savings and Mortgage Bank. the same is the law between them and they are bound to comply with the provisions contained therein.25 where the issue raised was whether the 24% p. may not be considered as unconscionable and excessive.1âwphi1 This surcharge or penalty stipulated in a loan agreement in case of default partakes of the nature of liquidated damages under Art. agreed upon by petitioners and respondent bank to be unconscionable.649. this Court sustained the agreement of the parties to a 24% per annum interest on an P8.24 In this case. The obligor would then be bound to pay . stipulated interest rate is unreasonable under the circumstances. thus.000. jurisprudence establish that the 24% p. we answered in the negative and held: In Spouses Zacarias Bacolor and Catherine Bacolor v. hence. Also.. We also do not find the stipulated 12% p. unconscionable and exorbitant.a. it is expressly recognized by law.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. Based on the above jurisprudence. CA.26 Clearly. 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. 2227 of the New Civil Code.a. considering that the mortgage agreement was freely entered into by both parties. Moreover. or less than 2% per month.a. Court of Appeals. which are much lower than those interest rates agreed upon by the parties in the above-mentioned cases.a. the stipulation was void for being contrary to morals. the interest rate agreed upon by the parties was only 23% p. this Court held that the interest rate of 24% per annum on a loan of P244.27 we held: The 1% surcharge on the principal loan for every month of default is valid. Dagupan City Branch.250. Court of Appeals.a. Thus. penalty charge excessive or unconscionable. It is an accessory undertaking to assume greater liability on the part of an obligor in case of breach of an obligation.a. agreed upon by the parties. and is separate and distinct from interest payment.00. As such. We do not consider the interest rate of 23% p. interest rate imposed on petitioners' loan in this case can by no means be considered excessive or unconscionable. may not be considered unconscionable.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. In Ruiz v. the 23% p. the Court finds that the 24% per annum interest rate. In Villanueva v. in Garcia v. there is no similarity of factual milieu for the application of those cases. provided for in the subject mortgage contracts for a loan of P225.000.00. stipulated interest rate was not considered unconscionable.

WHEREFORE. ..the failure of the performance was due to either force majeure or the acts of the creditor himself.. A contract is the law between the parties and they are bound by the stipulations therein.30 Here. Ltd. 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. 2010 and the Resolution dated July 20. The Decision dated June 17. penalty charge. petitioners cannot now back out on their obligation to pay the penalty charge.a.the stipulated amount of indemnity without the necessity of proof on the existence and on the measure of damages caused by the breach.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. the debtor has the burden of proving an excuse . Family Foods Manufacturing Co. petitioners defaulted in the payment of their loan obligation with respondent bank and their contract provided for the payment of 12% p. SO ORDERED. the petition for review is DENIED. in order to avoid the payment of the penalty. x x x28 And in Development Bank of the Philippines v. 2011 of the Court of Appeals are hereby AFFIRMED.

was enacted on April 12. Petitioner. Sp-181. vs. Sy did not question the City’s right to expropriate the subject property. the City. Engr. through then Mayor Ismael Mathay.7 On March 18.9 During the preliminary conference on November 8. only the amount of just compensation remained at issue. s-94. 2013 HENRY L.500. Sy (Sy) just compensation set as P5. filed a complaint for expropriation with the RTC in order to acquire a 1. Balintawak. otherwise known as the "Local Government Code of 1991. 7160 (RA 7160). 1997. 202690 June 5. Respondent. 2008 Order4 of the Regional Trial Court of Quezon City." the City deposited the amount of P241. Q-96-29352. Ordinance No. playground and community activity center for the benefit of the residents of Barangay Balingasa. Jr. 2012 Resolution3of the Court of Appeals (CA) in CA-G.. 1996. in a Report dated February 11. CV No. including P200. LOCAL GOVERNMENT OF QUEZON CITY.R. Branch 80 (RTC) in Civil Case No. 1994.Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G. Quezon City.000 sq. ordering respondent Local Government of Quezon City (the City) to pay petitioner Henry L. m. owned and registered under the name of Sy (subject property). J.10 On July 6. Carlo Alcantara (Commissioner Alcantara) as commissioners to determine the proper amount of just compensation to be paid by the City for the subject property.6 The requisite ordinance to undertake the aforesaid expropriation namely.R. parcel of land. pursuant to Section 198 of Republic Act No. representing 15% of the fair market value of the subject property based on its tax declaration.).090. day-care center.000. m. the RTC appointed Edgardo Ostaco (Commissioner Ostaco). DECISION PERLAS-BERNABE. 2008. The Facts On November 7.00 with the Office of the Clerk of Court. 2006. Victor Salinas (Commissioner Salinas) and Atty. Commissioners Ostaco and Alcantara. Thus. recommended the payment .00 per square meter (sq.00 as exemplary damages and attorney’s fees equivalent to one percent (1%) of the total amount due. No. Subsequently.: Assailed in this petition for review on certiorari1 are the January 20.5 which was intended to be used as a site for a multi-purpose barangay hall. 91964 which affirmed with modification the August 22. SY. 2012 Decision2 and July 16. 2006.

finding no sufficient evidence to support the same. Accordingly.of P5.272. based on the September 4..22 Nonetheless. 2008.16 The CA Ruling In the Decision dated January 20. Sy filed an appeal with the CA.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. Commissioner Salinas filed a separate Report dated March 7.500.14 Finally.25 . m.000 sq. considering that it was arrived at after taking into account: (a) the fair market value of the subject property in the amount of P4.00 per sq. m.11 The RTC Ruling In the Order dated August 22.13 Further.18 (b) the market value of the subject lot in the amount of P2.00. held that the just compensation for the subject property should be set at P5.00 in total.00 per sq.17 the CA affirmed the RTC’s ruling but modified the same. m. 1996 recommendation of the City Appraisal Committee.000.19 and (c) Sy’s own tax declaration for 1996.500. m. Rodriguez (MIAA).500. denied Sy’s claim of back rentals considering that the RTC had already granted legal interest in his favor. or on November 7. valuation made by independent appraisers Cuervo and Asian Appraisers in 1995 and 1996. ordering the City to pay Sy the amount of P200.000. while legal interest was not claimed.12 the RTC.050. m.000. adopted the findings of Commissioners Ostaco and Alcantara and thus. 1996 until full payment of just compensation. On the other hand. recommending the higher amount ofP13.00 per sq. 2008. for the 1.000. Likewise.00 per sq. or P5. citing the principle that just compensation must be fair not only to the owner but to the expropriator as well.00 per sq.000.00 as exemplary damages and attorney’s fees equivalent to one percent (1%) of the total amount due. respectively. computed from November 7.20 stating that the subject property has a total market value of P2..00 per sq.24 It. m. citing the case of Manila International Airport Authority v. 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.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. for equity considerations. 2012. It found the appraisal of Commissioners Ostaco and Alcantara for the subject property to be more believable than the P13. based on several sworn statements made by Sy himself. however.500. subject property arrived at by Commissioners Ostaco and Alcantara was more than fair and reasonable. it found no basis for the award of damages and back rentals in favor of Sy.500. m. to be computed from the date of the filing of the expropriation complaint.000. m. it awarded six percent (6%) legal interest. it held that the fair market value ofP5.23 it awarded exemplary damages in the amount of P200.00 per sq. 1996.15 Dissatisfied. as just compensation.

32 In this regard. A claim of excusable negligence does not loosely warrant a relaxation of the rules. 201226 for being filed out of time. 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. 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. (b) upheld the amount of just compensation as determined by the RTC as well as its grant of six percent (6%) legal interest. Failure to seasonably move for reconsideration. Atty. Meris (Atty. it is apt to mention that Sy’s counsel. 2012. 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.34 The standard of carerequired is that which an ordinarily prudent man bestows upon his important business. Tranquilino F. Meris).27 The City also filed a motion for reconsideration which was equally denied for lack of merit.28 Hence. as per the Postmaster’s Certification.36 Applying these principles. Verily. on the Notice of Decision33 constitutes excusable negligence which should therefore. this petition.30 However. relaxation of procedural rules At the outset. A.29 or on February 10. and (c) awarded exemplary damages and attorney’s fees. was properly dismissed by the CA. 2012. Records show that. 2012 Decision was received by Sy on January 26. any motion for reconsideration therefrom should have been filed not later than fifteen (15) days from receipt. or on February 13. The Court’s Ruling The petition is partly meritorious. Evidently. Sy filed his motion for reconsideration (subject motion) a day late.31 which thus.Aggrieved. 2012 and as such. Meris’ misstep based on his proffered reasons. instead of January 26. justify a relaxation of the rules. renders the CA decision final and executory. 2012. 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 .35 In this accord. claims that his secretary’s inadvertent placing of the date January 27. Sy moved for reconsideration which was denied in the Resolution dated July 16. the Court cannot excuse Atty. the CA’s January 20. 2012. excusable negligence. The assertion is untenable. the Court observes that Sy’s motion for reconsideration was filed out of time and thus.

In fine.account for oversights such as that committed by his secretary. as well as the time of its accrual. 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. 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. should render the CA’s January 20. being an effective forbearance. and one who desires to sell. 2012 Decision already final and executory and hence. contrary to existing jurisprudence. the Court deems it proper to relax the rules of procedure and thus. at 12% per annum should help . the Court holds that the correct rate of legal interest to be applied is twelve percent (12%) and not six percent (6%) per annum. as a matter of course. 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. owing to the nature of the City’s obligation as an effective forbearance. 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. or where the interest of justice so requires. This allowance of interest on the amount found to be the value of the property as of the time of the taking computed. procedural rules may. The Bulacan trial court. it fixed at the time of the actual taking by the government. In this respect. if property is taken for public use before compensation is deposited with the court having jurisdiction over the case. nonetheless. viz: The constitutional limitation of "just compensation" is considered to be the sum equivalent to the market value of the property. CA. B.38 As applied in this case. between the taking of the property and the actual payment. in its 1979 decision. bar the instant petition – is incommensurate to the injustice which Sy may suffer. warrants the application of the 12% legal interest rate. proceed to resolve these substantive issues. may not be strictly followed where observance of it would result in the outright deprivation of the client’s liberty or property. This is in line with the Court’s observation that the amount of just compensation. Be that as it may. which states that the mistakes of counsel bind the client. were incorrectly adjudged by both the RTC and the CA. In the case of Republic v. Thus. 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.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 Court finds that the procedural consequence of the abovediscussed one-day delay in the filing of the subject motion – which. Indeed. the rule.37 Corollarily. Rate of legal interest and time of accrual Based on a judicious review of the records and application of jurisprudential rulings. the rate of legal interest. ordinary prudence could have prevented such mistake.

However. Sp-181. 2012 Decision. the property was actually taken during that time and from thereon. resolution to effect expropriation. the Court.45 did not affect the character of the City’s taking of the subject property in 1986 as the CA. The MIAA ruling was applied in the more recent case of City of Iloilo v. considering that the expropriated property was already being used as Barangay day care and office. Records show that the City itself admitted in its Appellee’s Brief filed before the CA that as early as 1986.47 wherein the Court said: .e. i. the CA noted that the City enacted Ordinance No. legal interest should have already accrued. x x x (Emphasis and underscoring supplied) In similar regard.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. as it previously admitted.46 Therefore. 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. it already commenced with the taking of the subject property as early as 1986. 1996. In this relation."42 Thus. only on April 12. Judge Lolita Contreras-Besana . This irregularity does not. however. notwithstanding the lack of proper authorization."44 Notably. 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. (Emphasis and underscoring supplied) As to the reckoning point on which the legal interest should accrue. 1994 and filed its expropriation complaint on November 7. In this light. Rivera. 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. Case law dictates that there is "taking" when the owner is actually deprived or dispossessed of his property. the legal character of the City’s action as one of "taking" did not change. s-94. "a burden was already imposed upon the owner of the subject property x x x.1âwphi1 As correctly observed by the CA. in its January 20. 1996. citing as basis the MIAA case. 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. 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.40 pronounced that: In many cases decided by this Court. suggests. the lack of proper authorization. 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. Accordingly. in Land Bank of the Philippines v. proceed without any consequence..eliminate the issue of the constant fluctuation and inflation of the value of the currency over time. as of the date of the taking. interest must run from such time.

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

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

which plaintiff-appellee accepted. involving crushed basalt rock delivered by plaintiffappellee to defendant-appellant PNCC. whereby defendants-appellants would issue the check corresponding to the value of the materials to be delivered. Jr. APAC MARKETING CORPORATION. Respondents. defendants-appellants engaged the services of plaintiff-appellee by buying aggregates materials from plaintiff-appellee. 2013 PHILIPPINE NATIONAL CONSTRUCTION CORPORATION. . CJ. The Antecedent Facts Considering that there are no factual issues involved." but prior to the implementation of the said payment agreement. vs. 190957 June 5. and plaintiff-appellee APAC. ONG.: In this Petition for Review on Certiorari under Rule 45 of the Revised Rules on Civil Procedures. and (iii) after making deliveries pursuant to the purchase orders and despite demands by plaintiff-appellee. alleging that (i) in March 1998.80 "plus legal interest at the rate of not less than 6% monthly. represented by Cesar M. to start in April. On August 17. for which the latter had delivered and supplied good quality crushed basalt rock...R. (ii) the parties had initially agreed on the terms of payment. 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. The complaint prayed for payment of the amount of P782. DECISION SERRENO. defendants appellants failed and refused to pay and settle their overdue accounts. Branch 96. represented by CESAR M.Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G. plaintiff-appellee filed with the trial court a complaint against defendants-appellees for collection of sum of money with damages. No. defendants-appellants requested from plaintiff-appellee a 30-day term from the delivery date within which to pay. as follows: The present case involves a simple purchase transaction between defendant-appellant Philippine National Construction Corporation (PNCC). Ong. or "Check Before Delivery. 1999. JR. 1999 until the full obligation is completely settled and paid.296. represented by defendantsappellants Rogelio Espiritu and Rolando Macasaet. we hereby adopt the CA’s findings. as the Court of Appeals (CA) adopted the findings of fact of the Regional Trial Court (RTC) of Quezon City. Petitioner." among others.

00 as attorney’s fees.80 was without factual and legal bases.000. but still it ordered them to pay legal interest of twelve per cent (12%) per annum. based on the latest liquidation report. P50. defendants-appellants were deemed to have waived the presentation of their evidence. On July 10.269.234. the dispositive portion of which reads: WHEREFORE. the award by the trial court of actual damages in the amount ofP782. by ordering defendants jointly and solidarily to pay plaintiff as follows. For their repeated failure to attend the hearings. alleging that the complaint was premature considering that defendant-appellant PNCC had been faithfully paying its obligations to plaintiff-appellee.92.00 per court appearance. amounted to onlyP474.80 as actual damages. However. the principal obligation was fully paid and hence.083 2.On November 16. plus P3. 3.000. After the submission of the respective pre-trial briefs of the parties. defendants-appellants filed a motion to dismiss. the decision dated July 10. 2006 is hereby modified.095. In an Order dated January 17. Cost of suit. as can be seen from the substantial reduction of its overdue account as of August 1999. judgment is hereby rendered in favor of the plaintiff. Thus: "WHEREFORE. the trial court considered defendants-appellants’ claim of full payment of the principal obligation. only plaintiff-appellee presented its evidence. 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. the trial court denied the motion to dismiss. to wit: 1. In an Order dated October 6." . 2006. P220. 2. SO ORDERED. ordering defendants jointly and solidarily to pay: 1. 2006. alleging that during the pendency of the case. the trial court rendered a Decision. Defendants-appellants filed a motion for reconsideration.000. 1999. 3. trial was held. P782. 2000.00 per court appearance.296.000. defendants-appellants filed their answer.00 as attorney’s fees. Thus. SO ORDERED. Cost of Suit. P50. plus P3.

THE RULING OF THE COURT OF APPEALS On 9 July 2009. THE REGIONAL TRIAL COURT GRAVELY ERRED IN HOLDING DEFENDANTS ROGELIO ESPIRITU AND ROLANDO MACASAET JOINTLY AND SOLIDARILY LIABLE WITH DEFENDANT PNCC. the appellate court’s Former Special Fourth Division denied petitioner’s Motion for Reconsideration in a Resolution dated 18 January 2010.Defendants-appellants filed the present appeal which is premised on the following assignment of errors: I. affirming with modification the assailed Decision of the court a quo. the Special Fourth Division of the CA promulgated a Decision3 in CAG. computed from January 8. 2006 is affirmed in all other respects. THE REGIONAL TRIAL COURT GRAVELY ERRED IN AWARDING INTEREST AT THE RATE OF 12% PER ANNUM AMOUNTING TO P220.083 AND ATTORNEY’S FEES IN FAVOR OF PLAINTIFF-APPELLEE.234. Thus. The dispositive portion of the CA Decision reads as follows: WHEREFORE. 2006 is affirmed. 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. THE COURT’S RULING The Petition is impressed with merit. As a general rule. to wit: . 88827.6 THE SOLE ISSUE Aggrieved. II. 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. 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. In the absence on such stipulation. On 29 July 2009. the parties may stipulate the recovery of attorney’s fees. the appealed Order dated October 6. Defendants-appellants Rogelio Espiritu and Rolando Macasaet are absolved from liability. CV No. 1999 until its full payment in January 2001. However.R. 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. 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. herein petitioner filed a Motion for Reconsideration.4 It should be noted that in said motion. The Order dated October 6. which raised the lone issue of the propriety of the award of attorney’s fees in favor of respondent. this article restrictively enumerates the instances when these fees may be recovered.

In ABS-CBN Broadcasting Corp. 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. and equitable justification. v. laborers and skilled workers. other than judicial costs. Even when a claimant is compelled to litigate with third persons or to incur expenses to protect his rights. In all cases. In the absence of stipulation. attorney's fees and expenses of litigation.Art. legal. (10) When at least double judicial costs are awarded. CA. the attorney's fees and expenses of litigation must be reasonable. (7) In actions for the recovery of wages of household helpers. except: (1) When exemplary damages are awarded. 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.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. They are not to be awarded every time a party wins a suit. cannot be recovered. (3) In criminal cases of malicious prosecution against the plaintiff. just and demandable claim. (4) In case of a clearly unfounded civil action or proceeding against the plaintiff. 2208. (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. (11) In any other case where the court deems it just and equitable that attorney's fees and expenses of litigation should be recovered. . (8) In actions for indemnity under workmen's compensation and employer's liability laws. (5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's plainly valid. 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. (6) In actions for legal support. (9) In a separate civil action to recover civil liability arising from a crime. The power of the court to award attorney’s fees under Article 2208 demands factual.

while in its extraordinary concept.12 We have perused the assailed CA’s Decision.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. the basis for the grant must be clearly expressed in the decision of the court.11 It bears reiteration that the award of attorney’s fees is an exception rather than the general rule. they may be awarded by the court as indemnity for damages to be paid by the losing party to the prevailing party. attorney's fees represent the reasonable compensation paid to a lawyer by his client for the legal services he has rendered to the latter. 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. legal.10 Due to the special nature of the award of attorney’s fees. which in this case we find to be sorely inadequate. In the ordinary sense. 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.9 We agree with petitioner on these points. and in all cases it must be reasonable. legal. a rigid standard is imposed on the courts before these fees could be granted. As such. Attorney's fees as part of damages are awarded only in the instances specified in Article 2208 of the Civil Code. The appellate court simply quoted the portion of the RTC Decision that granted the award as basis for the affirmation thereof. it alleges that the court a quo has not given any factual. We have consistently held that an award of attorney’s fees under Article 2208 demands factual. are not necessarily equated to the amount paid by a litigant to a lawyer. or equitable justification for the award of attorney’s fees in favor of respondent.In Benedicto v. and equitable justification to avoid speculation and conjecture surrounding the grant thereof.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. 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. Villaflores. as part of damages. legal. 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. Further. 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. thus. . The CA merely adopted the RTC’s rational for the award. We do not put a premium on the right to litigate. it is imperative that they clearly and distinctly set forth in their decisions the basis for the award thereof. It is not enough that they merely state the amount of the grant in the dispositive portion of their decisions. We can glean from the above ruling that attorney’s fees are not awarded as a matter of course every time a party wins. Attorney's fees. There was no elaboration on the basis. On occasions that those fees are awarded. but cannot find any factual. Hence. 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.

we hold that the award of attorney’s fees by the court a quo. 88827 is MODIFIED.R. WHEREFORE. was forced to litigate to protect the latter’s interest. Absent such finding. in favor of respondent APAC Marketing Incorporated. plaintiff is entitled to recover attorney’s fees in the amount of P50. in that the award of attorney’s fees in the amount of P50.00 as appearance fee. SO ORDERED. as complainant in the civil case. the foregoing Petition is GRANTED. is hereby DELETED. Republic of the Philippines SUPREME COURT Manila . to litigate and to protect his interest by reason of an unjustified act of the other party. No pronouncement as to costs.13 The only discernible reason proffered by the trial court in granting the award was that respondent.000 as acceptance fee and P3. as sustained by the appellate court. 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. was improper and must be deleted. CV No.000.000 as appearance fee.00 which it paid as acceptance fee and P3. Thus.The RTC found as follows: x x x since it is clear that plaintiff was compelled to hire the services of a counsel.000. The assailed Decision dated 9 July 2009 of the Court of Appeals in CA-G.

2007 of the Regional Trial Court (RTC) of Pasig City. FELI replied. 2012 and the resolution3 dated May 31. INC. assailing the decision2 dated February 22. no certificate was issued.5 the Class "C" Common Share to respondent Vertex Sales and Trading.000. J. Sometime in August 1997. FELI is also a stock corporation. FEGDI was the developer of the Forest Hills Golf and Country Club (Forest Hills) and.00). Vertex filed on January 7. FELI and Forest Hills. on installment. FEGDI sold. in consideration for its financing support and construction efforts. filed by petitioners Fil-Estate Golf and Development.00. On the basis of its rights under Article 1191 of the Civil Code. the share remained in the name of FEGDI.000. and FILESTATE LAND. CV No. but is engaged in real estate development. was issued several shares of stock of Forest Hills. 202079 June 10. No. instructed Forest Hills to recognize Vertex as a shareholder. plus interest. Petitioners. RSACC sold. (FEGDI) and Fil-Estate Land. VERTEX SALES AND TRADING.100. 2001. As the demand went unheeded. on February 11. This prompted Vertex to make a final demand on March 17. 2002 a Complaint for Rescission with Damages and Attachment against FEGDI. Prior to the full payment of the purchase price. Seventeen (17) months after the sale (or on July 28. RSACC advised FEGDI of the sale to Vertex and FEGDI. vs. The assailed CA rulings reversed the decision dated March 1. INC. 1999. 68791. Vertex enjoyed membership privileges in Forest Hills.. Branch 161. Despite Vertex’s full payment.4 THE FACTS FEGDI is a stock corporation whose primary business is the development of golf courses. During the pendency of the rescission action (or on . Vertex wrote FEDGI a letter demanding the issuance of a stock certificate in its name.: Before the Court is the petition for review on certiorari1 under Rule 45 of the Rules of Court. Although Vertex complied with the request.100. in turn. Vertex prayed for the rescission of the sale and demanded the reimbursement of the amount it paid (or P1. For this reason. in Civil Case No. initially requested Vertex to first pay the necessary fees for the transfer. Respondent. Inc. 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. 89296.SECOND DIVISION G. (FELl). (Vertex). to RS Asuncion Construction Corporation (RSACC) one Class "C" Common Share of Forest Hills for P1.R. Inc. 2013 FIL-ESTATE GOLF AND DEVELOPMENT. DECISION BRION.. 2000).R. 2012 of the Court of Appeals (CA) in CA-G. Inc. INC.

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

Vertex fully paid the purchase price by February 11. except as between the parties.Given the parties’ arguments." In that case. THE COURT’S RULING The petition lacks merit. countersigned by the secretary or assistant secretary. 1999 but the stock certificate was only delivered on January 23. and sealed with the seal of the corporation shall be issued in accordance with the by-laws. 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. 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.1âwphi1 No transfer. Under these facts. considered in relation to the governing law. representing the shares of stock purchased by Vertex. physical delivery of a stock certificate is one of the essential requisites for the transfer of ownership of the stocks purchased. until the transfer is recorded in the books of the corporation showing the names of the parties to the transaction. (Finvest Securities) in February 1997. 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. Inc. Certificate of stock and transfer of shares. within a reasonable time from the point the shares should have been delivered. Trans-Phil Marine Ent. Section 63 of the Corporation Code provides: SEC. FEGDI clearly failed to deliver the stock certificates. – The capital stock of stock corporations shall be divided into shares for which certificates signed by the president or vice-president. 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. It is not entirely correct to say that a sale had . 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.. (Trans-Phil) and Roland Garcia bought Piltel shares from Finvest Securities Co. Trans-Phil and Garcia filed an action first for specific performance. 63. the date of the transfer. Court of Appeals.. Since Finvest Securities failed to deliver the stock certificates. shall be valid. Physical delivery is necessary to transfer ownership of stocks The factual backdrop of this case is similar to that of Raquel-Santos v. Inc.9 where the Court held that in "a sale of shares of stock. which was later on amended to an action for rescission. In this case.

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

. As a result. Sime Darby fully paid Mendoza his separation pay amounting to more thanP3. marketing. claiming that this represented his unpaid separation benefits. INC. 89178. Petitioner. 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. 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 .000. and distribution of the company's tires and rubber products. vs. Inc. J. Nine years later.363. Sime Darby filed a complaint10 for damages with writ of preliminary injunction against Mendoza with the Regional Trial Court (RTC) of Makati City. From the time of purchase in 1987. On 3 July 1987. Before the sale could push through.Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G. the sale did not push through and Sime Darby was compelled to return the payment to the prospective buyer.: 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. (Sime Darby) employed Jesus B. The Facts Petitioner Sime Darby Pilipinas. 202247 June 19. Branch 132. JESUS B. the broker required Sime Darby to secure an authorization to sell from Mendoza since the club share was still registered in Mendoza’s name. and handed over the documents to Sime Darby.R. On 13 September 2005. Sime Darby found an interested buyer of the club share for P1.000.000.9 also in blank.64. DECISION CARPIO.5 The share. Mendoza endorsed the Club Share Certificate8 in blank and executed a Deed of Assignment. Sime Darby paid for the monthly dues and other assessments on the club share. When Mendoza retired in April 1995. MENDOZA. Mendoza refused to sign the required authority to sell or special power of attorney unless Sime Darby paid him the amount ofP300.7 As part of the arrangement. however. or sometime in July 2004.R.101. However. 2013 SIME DARBY PILIPINAS. No. 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. Mendoza (Mendoza) as sales manager to handle sales. Respondent. CV No.

enjoining Mendoza from availing of the club’s facilities and privileges as if he is the owner of the club share. Thus. the same employee of ACC who also testified for Sime Darby. i. Mendoza presented two witnesses: (1) himself. On 13 March 2006. and Baguio Golf and Country Club. (2) Sime Darby allowed him to personally choose the share that he liked as part of his benefits. Sime Darby regularly paid for the monthly dues and other assessments on the ACC Class "A" club share. Mendoza filed an Answer alleging ownership of the club share. 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.000. Sime Darby added that during Mendoza’s employment with the company until his retirement in April 1995. Sime Darby prayed that a restraining order be issued. Mendoza also alleged that when he retired in 1995. who testified that Mendoza refused to give Sime Darby his authorization to sell the club share unless he was paid P300. he had to personally undergo an interview with regard to his background and not the company’s. and (3) Ira F. 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. 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. the RTC denied Sime Darby’s prayer for restraining order and preliminary injunction. Makati Sports Club. A-1880 at the back and to sign the assignment of rights. Manila Golf and Country Club. who confirmed that the club share could not be sold to a corporation like Sime Darby. ACC’s Membership Department Supervisor. to the damage and prejudice of Sime Darby. Javier. 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. (4) though he retired in 1995. Ronald E. 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’s VicePresident for Legal Affairs and Corporate Secretary. Sime Darby presented three witnesses: (1) Atty. On the other hand. trial on the merits ensued. In his testimony. and (2) Ranel Villar.000. Quezon City Sports Club. 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 failed to give some of his retirement benefits amounting to P300.000 as additional retirement benefit and that Sime Darby was compelled to institute the case and incurred legal expenses of P200. On 3 January 2006. Further.various club memberships. he only started paying . pending the hearing on the issuance of a writ of preliminary injunction. (2) Ranel A. Villar. Cascon. 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. Mendoza resumed using the facilities and privileges of ACC.e. Thereafter. On 15 November 2005. (3) as a condition for membership in ACC. Mendoza testified that (1) he owns the disputed club share. who testified that she asked Mendoza to endorse ACC Stock Certificate No. as required by Sime Darby. Sime Darby’s Treasurer since 1998. the trial court denied the motion. Wack Wack Golf Club.

premises considered. Ronald E. Sime Darby’s representative.. Javier. (5) in May 2004. states: SEC. On 30 March 2012. and (6) ACC recognizes him as the owner of the club share. from making use of Stock Certificate No. and (2) whether the appellate court erred in declaring that Mendoza is the owner of the club share. to discuss the supposed selling of the club share which he refused since there were still unpaid retirement benefits due him. Hence.000. he met with Atty. 3. which provides for the grounds for the issuance of a preliminary injunction. Mendoza to pay the plaintiff P100.13 The appellate court ruled that Sime Darby failed to prove that it has a clear and unmistakable right over the club share of ACC.000. 1880 of the Alabang Golf and Country Club. Resultantly.the club share dues in 2004 because after his retirement. is hereby DISMISSED. – A preliminary injunction may be granted when it is established: .00 as temperate damages. Inc. Rule 58 of the Rules of Court. the appealed decision of the Regional Trial Court is REVERSED and SET ASIDE. and ordering defendant Jesus B. The Court’s Ruling The petition has merit. Section 3. the appellate court reversed the ruling of the trial court. Mendoza. its former employee. The Issues The issues for our resolution are: (1) whether Sime Darby is entitled to damages and injunctive relief against Mendoza.12 Mendoza filed an appeal with the Court of Appeals. The dispositive portion states: WHEREFORE. 05821. SO ORDERED. the trial court rendered a Decision in favor of Sime Darby. On 30 April 2007. 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. SO ORDERED. and P250. Grounds for issuance of preliminary injunction.14 Sime Darby filed a Motion for Reconsideration which the Court of Appeals denied in a Resolution15 dated 6 June 2012. the Complaint in Civil Case No. in view of all the foregoing. the instant petition. judgment is hereby rendered enjoining defendant Jesus B.00 as attorney’s fees and litigation expenses. The dispositive portion of the Decision states: WHEREFORE.

court. some act or acts probably in violation of the rights of the applicant respecting the subject of the action or proceeding. 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. Mendoza identified his signature over the printed words "name of assignee" as his own and when confronted with his Reply-Affidavit. (b) That the commission. as Sime Darby’s Sales Manager. and tending to render the judgment ineffectual. or in requiring the performance of an act or acts. and the whole or part of such relief consists in restraining the commission or continuance of the act or acts complained of. Sime Darby placed its name in full as the owner of the share and Mendoza as the assignee of the club share." Even during the trial.. (3) that there is an urgent and permanent act and urgent necessity for the writ to prevent serious damage.19 Further. threatening or is attempting to do. at Mendoza’s cross-examination. Sime Darby’s former sales manager. Sime Darby sent a letter18 dated 17 September 1987 addressed to ACC confirming that "Mendoza. Clearly. Greenfield Development Corp. these circumstances show that there existed a trust relationship between the parties. Such fact was clearly proved when in the application form17 dated 17 July 1987 of the ACC for the purchase of the club share. Mendoza admitted signing the club share certificate and the assignment of rights. Sime Darby presented evidence that it acquired the Class "A" club share of ACC in 1987 through a Deed of Sale. either for a limited period or perpetually. or is procuring or suffering to be done. under a trust arrangement. Sime Darby had the share registered under the name of respondent Mendoza. In the present case. Sime Darby has the burden of establishing the following requisites: (1) a right in esse or a clear and unmistakable right to be protected. agency or a person is doing. In Medina v. is entitled to club membership benefit of the Company. (2) a violation of that right. or (c) That a party. continuance or non-performance of the act or acts complained of during the litigation would probably work injustice to the applicant.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. Also. Its sole aim is to preserve the status quo until the merits of the case can be heard fully. petitioner Sime Darby has sufficiently established its right over the subject club share. . both in blank. to be entitled to an injunctive writ.(a) That the applicant is entitled to the relief demanded. Being a corporation which is expressly disallowed by ACC’s By-Laws to acquire and register the club share under its name. and turning it over to Sime Darby. in connection with the application for membership. Thus.

It can be gathered then that Sime Darby did not intend to give up its beneficial interest and right over the share. that such bills be forwarded to his personal address starting September 2004. Ronald E. as the transferee. his title is only limited to the usufruct. the monthly bills were regularly sent to Sime Darby’s business address until Mendoza requested in August 2004. In Thomson v. from the time the share was purchased in 1987 until 1995.20 we held that a trust arises in favor of one who pays the purchase price of a property in the name of another. 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. Mendoza signed the share certificate and assignment of rights both in blank. since 1987. 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 corporation. in order to prevent further damage and prejudice to itself. as a senior manager of the company. 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. Mendoza continued to do so. long after he retired from the employ of the company. Mendoza. Javier of Sime Darby’s plan to sell the share to an interested buyer. Thus. Mendoza. was extended the privilege of availing a club membership. Despite being informed by Sime Darby to stop using the facilities and privileges of the club share. He did not present any document to show that there was such an agreement between him and the company. Sime Darby properly sought injunction in this case. Second. Mendoza refused to give an authorization to sell the club share unless he was paid P300. Third. In August 2004. because of the presumption that he who pays for a thing intends a beneficial interest for himself. the following requisites must be present: (a) invasion of the right sought to be protected is material and substantial. or the use and enjoyment of the club’s facilities and privileges while employed with the company. Mendoza’s contention of the right of first refusal is a self-serving statement. A right of first refusal. cannot register a club share in its own name under the rules of the ACC. Mendoza was given the legal title.1âwphi1 At the same time. Last. While Sime Darby paid for the purchase price of the club share. First. Sime Darby paid for the monthly bills pertaining to the share. 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. Mendoza turned over possession of the documents to Sime Darby. Thus. Court of Appeals.000 allegedly representing his unpaid retirement benefit. In fact. as generously practiced by Sime Darby. (b) .While the share was bought by Sime Darby and placed under the name of Mendoza. 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. However. a resulting trust is presumed as a matter of law. However. As correctly observed by the RTC in its Decision dated 30 April 2007: In order for a writ of preliminary injunction to issue. The burden then shifts to the transferee to show otherwise. in this case. Mendoza violated Sime Darby’s beneficial interest and right over the club share after he was informed by Atty.

it was established that sometime in July 2004. plaintiff tried to sell the share but defendant refused to give the authority. Additionally.000 to the buyer. and with plaintiff’s demand upon the defendant to desist from making use of the club facilities having been ignored. the right of plaintiff over the share is clear and unmistakable. This is because when the share was registered under the name of defendant. it has interest and right over it.22 Thus. Hence. plaintiff is entitled to its prayer for injunction. The twin requirements of a valid injunction are the existence of a right and its actual or threatened violations. All the elements are present in the instant case. the Court deems it proper to impose upon the defendant P100.000 as temperate damages. clearly defendant violated plaintiff’s right over the use and enjoyment thereof. plaintiff’s payments of monthly billings of the subject share bolster defendant possession in trust rather than his ownership over the share. xxxx In the present case. . and (c) there is an urgent and paramount necessity for the writ to prevent serious damage.the right of the complainant is clear and unmistakable. plaintiff did not intend to relinquish its interest and right over the subject.000. Since the records show that Sime Darby was dissolved on 31 December 2011. Thus.100. as the true owner of the ACC Class "A" club share. With this. who lost his right to use the club share when he retired from the company. With defendant’s continued use of the subject share despite that he is not anymore connected with plaintiff.21 In sum. rather it intended to have the share held in trust by defendant. Sime Darby has the right to be protected from Mendoza's act of using the facilities and privileges of ACC. 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. With this. we grant the damages and injunctive relief sought by Sime Darby. xxxx As to the second issue. 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. There is a presumption that the share was bought for the use of the defendant while the latter is still connected with the plaintiff. Hence. plaintiff was forced to return the amount of P1. it has three years to convey its property and close its affairs as a body corporate under the Corporation Code. 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. 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. until a new grantee is named. Plaintiff bought the subject share in 1987. plaintiff claimed for temperate or moderate damages. Further. Thirdly. Sime Darby may choose to dispose of the club share in any manner it sees fit without undue interference from Mendoza. attorney's fees are hereby awarded in the amount of P250. As the purchaser of the share.

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

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