Civil Law Review 2 Digests (2016)

Arellano University School of Law
Taft Avenue corner Menlo Street, Pasay City
CIVIL LAW REVIEW 2

Digests of cases decided by the Supreme Court in
2016 and 2017 covered by Civil Law Review 2
Submitted by:
Anne Meagen DC. Maningas
Student number: 2012-0641

Section: Wednesday 1PM-5PM
Class number: 31
Submitted to:
Atty. Crisostomo A. Uribe
14 May 2017
CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017
TABLE OF CONTENTS
I. OBLIGATIONS
A. Sources of Civil Obligations
1. Quasi-delicts
Torres-Madrid Brokerage, Inc. v. Feb Mitsui Marine Insurance Co., Inc. and
Benjamin P. Manalastas, doing business under the name of BMT Trucking
Services ............................................................................................................................. 5
B. Kinds of civil obligations
1. As to performance of prestation
Spouses Alexander and Julie Lam v. Kodak Philippines, Ltd. ........................... 7
C. Compliance with civil obligations
Philippine Science High School - Cagayan Valley Campus v. PIRAA

Construction Enterprises ............................................................................................. 9
D. Breach of contractual obligations
1. Manner of breach
a. Delay
Tarcisio S. Calilung v. Paramount Insurance Corporation, RP Technical

Services, Inc., Renato L. Punzalan and Jose Manalo, Jr. ................................... 10
E. Remedies for Breach of obligations
Dr. Restituto C. Buenviaje v. Spouses Jovito R. Salonga and Lydia B.

Salonga, Jebson Holdings Corporation and Ferdinand Juat Banez ................ 11
1. Extra-judicial remedies
Nissan Car Lease Phils., Inc. v. Lica Management, Inc. and Proton Pilipinas,
Inc. ................................................................................................................................... 13
F. Modes of extinguishment of obligations
1. Payment or performance
Spouses Roberto and Adelaida Pen v. Spouses Santos and Linda Julian ....... 15
II. CONTRACTS
A. Fundamental characteristics of contracts
1. Consensuality of contracts
Teresita I. Buenaventura v. Metropolitan Bank and Trust Company ............ 16
Vicente D. Cabanting and Lalaine V. Cabanting v. BPI Family Savings Bank,

Inc. ................................................................................................................................... 17
2. Autonomy of contracts
1
Anecito Campos v. Bank of the Philippine Islands .............................................. 19
Century Properties, Inc. v. Edwin J. Babiano and Emma B. Concepcion ..... 20
B. Classification of contracts
1. according to solemnity or form
a. special form
IBM Philippines, Inc. v. Prime System Plus, Inc. ................................................. 22
C. Kinds of contracts as to validity
1. Void contracts
The Roman Catholic Bishop of Tuguegarao v. Florentina Prudencio, et al. . 23
Desiderio Ranara, Jr. v. Zacarias de los Angeles, Jr. .......................................... 25
2. Unenforceable contracts
Mactan Cebu International Airport Authority v. Heirs of Gavina Ijordan .. 27
D. Essential elements of contract
Kabisig Real Wealth Dev., Inc. and Fernando C. Tio v. Young Builders
Corporation ................................................................................................................... 28
Timoteo Bacalso and Diosdada Bacalso v. Gregoria B. Aca-ac, Eutiquia B.

Aguila, Julian Bacus, and Evelyn Sychangco ........................................................ 29
E. Breach of contractual obligations
Philippine Science High School - Cagayan Valley Campus v. PIRAA

Construction Enterprises ........................................................................................... 31
III. SALES
A. In general
1. Contract of sale and contract to sell
Thelma Rodriguez, joined by her husband v. Spouses Jaime Sioson and Armi
Sioson, et al. ................................................................................................................... 32
B. Elements of a contract of sale
1. consent of the contracting parties
Joey R. Pea, v. Jesus Delos Santos and the Heirs of Rosita Delos Santos
Flores ............................................................................................................................... 34
Melecio Domingo v. Spouses Genaro Molina and Elena B. Molina ................. 36
C. Remedies for breach of contract
1. Sale of movables on installments
Equitable Savings Bank v. Rosalinda C. Palces .................................................... 37
2
IV. LEASE
A. Termination of the lease
1. Loss of the thing
Spouses Jaime and Matilde Poon v. Prime Savings Bank represented by the
Philippine Deposit Insurance Corporation as Statutory Liquidator ............... 39
V. AGENCY
A. In general: nature
Magellan Aerospace Corporation v. Philippine Air Force ................................. 41
B. Essential elements of contract of agency
1. Form of contract of agency
Mactan-Cebu International Airport Authority v. Richard E. Unchuan......... 42
C. Obligations of the agent
Bank of the Philippine Islands And FGU Insurance Corporation (Presently

Known As BPI/MS Insurance Corporation) v. Yolanda Laingo ...................... 44
Dra. Mercedes Oliver v. Philippine Saving Bank and Lilia Castro ................. 46
VI. PARTNERSHIP
A. Obligations of partners with regard to third persons
Michael C. Guy v. Atty. Glenn C. Gacott ............................................................... 48
VII. TRUSTS
A. Kinds of trusts
1. Implied trusts
Jose Norberto Ang v. The Estate of Sy So .............................................................. 50
VIII. CREDIT TRANSACTIONS
A. Pledge, mortgage, antichresis
1. Provisions common to pledge and mortgage
a. Pactum commisorium
Spouses Roberto and Adelaida Pen v. Spouses Santos and Linda Julian ....... 52
2. accomodation mortgagor
Rosalina Carodan v. China Banking Corporation ............................................... 54
IX. TORTS AND DAMAGES
A. Torts
3
1. Persons liable
a. Vicarious liability
Greenstar Express, Inc. and Fruto L. Sayson, Jr. v. Universal Robina

Corporation and Nissin Universal Robina Corporation ..................................... 56
B. Damages
1. Kinds of damages
Moral damages; temperate damages
Sulpicio Lines, Inc. v. Napoleon Sesante ................................................................. 58
Coca-Cola Bottlers Philippines, Inc. v. Spouses Jose R. Bernardo and

Lilibeth R. Bernardo, doing business under the name and style Jolly
Beverage Enterprises ................................................................................................60
4
Torres-Madrid Brokerage, Inc. v. Feb Mitsui Marine Insurance Co., Inc. and Benjamin P.
Manalastas, doing business under the name of BMT Trucking Services
G.R. No. 194121, July 11, 2016
Second Division, J. Brion
(Obligations; sources of civil obligations; quasi-delict)
Facts:
Sony had engaged the services of TMBI to facilitate, process, withdraw, and deliver a shipment
of various electronic goods from Thailand. The agreement was to bring the good from the port to
Sonys warehouse in Binan, Laguna. TMBI did not own any delivery trucks so it subcontracted
the services of BMT. Sony was notified and had no objections. Four BMT trucks left the port
containing the shipments but only three arrived at the warehouse. The other truck was found
abandoned, with both the shipment and the driver missing.
TMBI notified Sony of the loss. Sony filed an insurance claim with Mitsui and after evaluation,
Mitsui paid Sony P7M corresponding to the value of the lost goods. Mitsui thereafter sent TMBI
a demand letter for payment of the lost goods. TMBI refused to pay. As a result, Mitsui filed a
case against TMBI. TMBI impleaded Benjamin Magtalas as third party defendant, alleging that
the negligence of the BMT driver is the proximate cause of the loss and should be held liable.
RTC found TMBI and Benjamin Manalastas jointly and slidarily liable to pay Mitsui the amount
it paid to Sony plus damages. The RTC held that TMBI and BMT are common carriers and acted
negligently. CA held that there is failure to observe extra-ordinary diligence in overseeing the
cargo and adopting security measures. Moreover, it held that TMBI shall be held liable for
breach of its contractual obligations to Sony when it failed to deliver the shipment.
Issue:
W/N TMBI and BMT are solidarily liable to Mitsui for the loss of the cargo as joint tortfeasors
under quasi-delict.
Held:
No. TMBI and BMT are not solidarily liable to Mitsui for the loss as joint tortfeasors. The ruling
was based on Article 2194 of the Civil Code:
Art. 2194. The responsibility of two or more persons who are liable for quasi-
delict is solidary.
Notably, TMBI's liability to Mitsui does not stem from a quasi-delict (culpa aquiliana) but from
its breach of contract (culpa contractual). The tie that binds TMBI with Mitsui is contractual,
albeit one that passed on to Mitsui as a result of TMBI's contract of carriage with Sony to which
Mitsui had been subrogated as an insurer who had paid Sony's insurance claim. The legal reality
that results from this contractual tie precludes the application of quasi-delict based Article 2194.
We have repeatedly distinguished between an action for breach of contract (culpa contractual)
and an action for quasi-delict (culpa aquiliana).
In culpa contractual, the plaintiff only needs to establish the existence of the contract and the
obligor's failure to perform his obligation. It is not necessary for the plaintiff to prove or even
allege that the obligor's non- compliance was due to fault or negligence because Article 1735
already presumes that the common carrier is negligent. The common carrier can only free itself
from liability by proving that it observed extraordinary diligence. It cannot discharge this
liability by shifting the blame on its agents or servants.
5
On the other hand, the plaintiff in culpa aquiliana must clearly establish the defendant's fault or
negligence because this is the very basis of the action. Moreover, if the injury to the plaintiff
resulted from the act or omission of the defendant's employee or servant, the defendant may
absolve himself by proving that he observed the diligence of a good father of a family to prevent
the damage.
In the present case, Mitsui's action is solely premised on TMBl's breach of contract. Mitsui did
not even sue BMT, much less prove any negligence on its part. If BMT has entered the picture at
all, it 'is because TMBI sued it for reimbursement for the liability that TMBI might incur from its
contract of carriage with Sony/Mitsui. Accordingly, there is no basis to directly hold BMT liable
to Mitsui for quasi-delict.
6
Spouses Alexander and Julie Lam v. Kodak Philippines, Ltd.

G.R. No. 167615, January 11, 2016
Second Division, J. Leonen
(Obligations; Kinds of civil obligations as to performance of prestation; divisible, indivisible;

Article 1225)
Facts:
Spouses Lam and Kodak entered into an agreement for the sale of three units of the Kodak
Minilab System 22XL (Minilab) in the amount of P1.796M per unit, with the ff. terms:
1. Said Minilab Equipment packages will avail a total of 19% multiple order
discount based on prevailing equipment price provided said equipment packages
will be purchased not later than June 30, 1992.
2. 19% Multiple Order Discount shall be applied in the form of merchandise and
delivered in advance immediately after signing of the contract.
* Also includes start-up packages worth P61,000.00.
3. NO DOWNPAYMENT.
4. Minilab Equipment Package shall be payable in 48 monthly installments at

THIRTY FIVE THOUSAND PESOS (P35,000.00) inclusive of 24% interest rate
for the first 12 months; the balance shall be re-amortized for the remaining 36
months and the prevailing interest shall be applied.
5. Prevailing price of Kodak Minilab System 22XL as of January 8, 1992 is at

ONE MILLION SEVEN HUNDRED NINETY SIX THOUSAND PESOS.
6. Price is subject to change without prior notice.

*Secured with PDCs; 1st monthly amortization due 45 days after installation.
On January 15, 1992, Kodak delivered and installed one unit of Minilab in Tagum and spouses
Lam issued 12 PDCs of P35,000.00 each as payment. However, spouses Lam requested Kodak
not to negotiate the first two checks due to insufficiency of funds. Both checks were negotiated
by Kodak and were honored by the bank but the subsequent checks were subsequently
dishonored after spouses lam ordered the bank to stop payment. Kodak cancelled the sale and
demanded spouses Lam to return the unit. Spouses Lam ignored the demand and rescinded the
contract through a letter stating that Kodak failed to deliver the other two remaining Minilab
units. Kodak filed a complaint for replevin and/or recovery of sum of money.
RTC found that Kodak defaulted in performance of its obligation under its Letter Agreement
with spouses Lam when it failed to deliver all three units as agreed, which caused spouses Lam
to stop paying for the rest of the installments. Thus, Kodak is ordered to pay for the amount of
the undelivered units and damages. On appeal, the CA modified RTCs Decision ruling that the
Letter Agreement executed by the parties showed that their obligations were susceptible of
partial performance.
On appeal, CA found that the intention of the parties is to be bound separately for each Minilab
Equipment to be delivered as shown by the separate purchase price for each of the item, by the
acceptance of spouses Lam of separate deliveries for the first Minilab Equipment, and for those
of the remaining two and the separate payment arrangements for each of the equipment. Under
this premise, spouses Lam shall be liable for the entire amount of the purchase price of the
Minilab Equipment delivered considering that Kodak had already completely fulfilled its
obligation to deliver the same.
7
Issue:
W/N the obligation of Kodak to deliver the three Minilab units to Spouses Lam as written in the
Letter Agreement is divisible and severable.
Held:
No. The Letter Agreement contained an indivisible obligation. The Letter Agreement
contemplated a package deal involving three (3) units of the Kodak Minilab System 22XL.
Based on the Letter Agreement, the intention of the parties is for there to be a single transaction
covering all three (3) units of the Minilab Equipment. Respondent's obligation was to deliver all
products purchased under a package, and, in turn, petitioners' obligation was to pay for the
total purchase price, payable in installments.
The intention of the parties to bind themselves to an indivisible obligation can be further
discerned through their direct acts in relation to the package deal. There was only one agreement
covering all three (3) units of the Minilab Equipment and their accessories. The Letter
Agreement specified only one purpose for the buyer, which was to obtain these units for three
different outlets. If the intention of the parties were to have a divisible contract, then separate
agreements could have been made for each Minilab Equipment unit instead of covering all three
in one package deal. Through the specified terms and conditions, the tenor of the Letter
Agreement indicated an intention for a single transaction. This intent must prevail even though
the articles involved are physically separable and capable of being paid for and delivered
individually, consistent with the New Civil Code. Article 1225 provides that For the purposes of
the preceding articles, obligations to give definite things and those which are not susceptible of
partial performance shall be deemed to be indivisible. When the obligation has for its object the
execution of a certain number of days of work, the accomplishment of work by metrical units, or
analogous things which by their nature are susceptible of partial performance, it shall be
divisible. However, even though the object or service may be physically divisible, an obligation
is indivisible if so provided by law or intended by the parties.
8
Philippine Science High School - Cagayan Valley Campus v. PIRAA Construction

Enterprises
G.R. No. 204423, September 14, 2016
Second Division, J. Del Castillo
(Obligations; substantial compliance of contractual obligations; Article 1234)
Facts:
PIRRA is a business that is engaged in general contracting and a licensed contractor registered
with Philippine Domestic Construction Board and owned by Artemio Perez. PSHS is a
government academic institution under DOST and is located in Nueva Vizcaya, headed by Dir.
Romo. PIRRA filed with CIAC a complaint for damages against PSHS relative to the
construction contracts for PSHS.
On Project A (Academic Building I Phases IV and V, and Girls Dormitory Building I Phase
IV), PIRAA requested for payment of partial billing (PB) no. 5 and substantial acceptance and
completion since the project is 94% complete. PSHS replied that it cannot grant PIRAAs
request for substantial completion and issuance of PB no. 5 pending correction of the noted
defects (conducted by an inspectorate team created by PSHS) and remaining work activities.
PIRAA and PSHS entered into an inspection agreement to be conducted by the DOST. While
waiting for the date of inspection, PSHS informed PIRAA that it would take over Project A. It
also stated that it would implement the repair of the identified defects through a third party, the
expenses of which would be deducted from PIRRAs final billing. PIRRA claimed that PSHSs
takeover of Project A is violative of its rights as the winning contractor. It argued that COAs
inspection on Project A was conducted without the presence of PIRRA; and the findings of the
COA are subject to protest for being one-sided. CIAC ruled in favor of PIRAA holding PSHS
liable for delay in paying PB No. 5 and in taking over Project A without legal basis. On appeal,
CA partially affirmed with modifications. CA ruled that Project A was substantially completed,
thus PSHS is liable for payment of PB no. 5.
Issue:
W/N there was a substantial compliance by PIRAA on Project A of its contract with PSHS.
Held:
Yes. There was substantial compliance by PIRAA and PSHS takeover is of no moment. When
PIRRA requested substantial acceptance and completion of Project A, PSHS did not object to
such a request. It acted upon it and even created an Inspectorate Team for punch listing, and for
the purpose of determining PIRRAs PB No. 5. Notably, PSHS repeatedly referred to PB No. 5
as the final billing for Project A. In fact, PSHS initially expressed its willingness to pay only to
put it on hold because of the COA Report. Nonetheless, as correctly explained by the CIAC,
such Report cannot affect PSHS obligation to pay PIRRA because the existence of the
defective or undelivered items was not an excuse to avoid payment of the progress billing, as the
payment was due on the performed items that were completed or were otherwise performed, save
for the defects.
In addition, as provided for under Article 1234 of the Civil Code, if the obligation had been
substantially performed in good faith, the obligor, in this case, PIRRA, may recover as if it had
strictly and completely fulfilled its obligation, less the damages suffered by the obligee or in this
instance, PSHS.
More importantly, consistent with the foregoing rule that the Court accords respect and finality
on the factual findings of the CIAC, as affirmed by the CA, the Court sustains the finding that
PSHS treated Project A as substantially completed; thus, it is liable to pay PIRRA the residual
value of PB No. 5.
9
Tarcisio S. Calilung v. Paramount Insurance Corporation, RP Technical Services, Inc.,

Renato L. Punzalan and Jose Manalo, Jr.
G.R. No. 195641, July 11, 2016
First Division, J. Bersamin
(Obligations; breach of obligations; delay; interest; Articles 1956, 2212)
Facts:
In March 16, 2005, the SC promulgated its resolution in the case Paramount Insurance
Corporation v. Tarcisio Calilung an RP Technical Services, Inc. and ordered respondents jointly
and severally liable to pay petitioner the principal obligation of P718,750.00, with interest at
14% per annum from October 7, 1987 until full payment, plus attorney's fees equivalent to 5% of
the amount due, and the costs of suit. The resolution became final and executory on July 19,
2005 and was recorded on the same date. The case was remanded to RTC for execution. Calilung
filed his petition arguing that he should be entitled to a compound interest of 12% per annum as
legal interest because the obligation of the respondent is a loan or forbearance of money.
Calilung also insisted that he is entitled to such interest under Article 2212 of the Civil Code.
Issue: W/N Calilung is entitled to the additional 12% interest per annum
Held:
No. The judgment directing the respondents to pay to the petitioner the principal amount of
P718,750.00 plus 14% interest is already final and executory. It is immutable and can no longer
be modified or otherwise disturbed.
The kinds of interest that may be imposed in a judgment are the monetary interest and the
compensatory interest. In this regard, the Court has expounded in Siga-an v. Villanueva:
Interest is a compensation fixed by the parties for the use or forbearance of money. This is
referred to as monetary interest. Interest may also be imposed by law or by courts as penalty or
indemnity for damages. This is called compensatory interest. The right to interest arises only by
virtue of a contract or by virtue of damages for delay or failure to pay the principal loan on
which interest is demanded.
Article 1956 of the Civil Code, which refers to monetary interest, specifically mandates that no
interest shall be due unless it has been expressly stipulated in writing. As can be gleaned from
the foregoing provision, payment of monetary interest is allowed only if: (1) there was an
express stipulation for the payment of interest; and (2) the agreement for the payment of interest
was reduced in writing. The concurrence of the two conditions is required for the payment of
monetary interest. Thus, we have held that collection of interest without any stipulation therefor
in writing is prohibited by law.
There are instances in which an interest may be imposed even in the absence of express
stipulation, verbal or written, regarding payment of interest. Article 2209 of the Civil Code states
that if the obligation consists in the payment of a sum of money, and the debtor incurs delay, a
legal interest of 12% per annum may be imposed as indemnity for damages if no stipulation on
the payment of interest was agreed upon. Likewise, Article 2212 of the Civil Code provides that
interest due shall earn legal interest from the time it is judicially demanded, although the
obligation may be silent on this point.
All the same, the interest under these two instances may be imposed only as a penalty or
damages for breach of contractual obligations. It cannot be charged as a compensation for the use
or forbearance of money. In other words, the two instances apply only to compensatory interest
and not to monetary interest.
10
Dr. Restituto C. Buenviaje v. Spouses Jovito R. Salonga and Lydia B. Salonga, Jebson
Holdings Corporation and Ferdinand Juat Banez
G.R. No. 216023, October 5, 2016
First Division, J. Perlas- Bernabe
(Obligations; remedies for breach of obligations; specific performance; rescission; Article 1191)
Facts:
In 1997, Jebson, an entity engaged in the real estate business, through iits Executive VP Banez,
enter into a Joint Venture Agreement (JVA) with spouses Salonga. Spouses Salonga owned three
parcels of land in Tagaytay. Under the JVA, Jebson will construct ten high-end single detached
residential units, to be known as Brentwoods. They likewise assumed to subdivide the property
into individual titles upon which Jebson shall assume the liability to pay their mortgage loan with
Metrobank. Jebson undertook to construct the units at its own expense, secure the building and
development permits, and the license to sell from the HLURB, as well as the other permits
required. 7 out of 10 units will belong to Jebson while the remaining 3 will correspond to
spouses Salongas share. Jebson was also allowed to sell its allocated units under such terms as it
may deem fit, subject to the condition that the price agreed upon was with the conformity of
spouses Salonga.
Jebson then entered into a Contract to Sell with Buenviaje over Unit 5 without the conformity of
spouses Salonga. Despite the full payment, Jebson was not able to complete construction of Unit
5 and when Buenviaje formally demanded immediate completion and delivery, Jebson cited the
1997 financial crisis as the reason for the delay. Buenviaje filed a case for specific performance
against Jebson and spouses Salonga before the HLURB, praying for completion of the unit,
partition and subdivision of the property, delivery of title, payment of damages and attorneys
fees. In the alternative, he prayed for rescission and return of all payments made with interest. In
their defense, Jebson and Baez claimed that they were ready to comply with all their contractual
obligations but were not able to secure the necessary government permits because Spouses
Salonga stubbornly refused to cause the consolidation of the parcels of land. For their part,
spouses Salonga averred that they were not liable to the complainants since there was no privity
of contract between them, adding that the contracts to sell were unenforceable against them as
they were entered into by Jebson without their conformity, in violation of the JVA.
HLURB rescinded the contract to sell and found spouses Salonga solidarily liable with Jebson
for the return of payments and damages. On appeal with HLURB-BOC, the Decision was
reversed, finding that the contract to sell was valid and that rescission is not proper. It held that
there was no substantial breach but only a casual one, which did not justify a rescission of
contract to sell, especially in view of the fact that the residential units covered by the said
contracts were already at their finishing stages. It, however, granted the remedy of specific
performance in Buenviajes favor. OP and CA affirmed the HLURB-BOC ruling.
Issue:
W/N the remedy of specific performance is proper under the circumstances.
Held:
Yes. Specific performance and rescission (more accurately referred to as resolution) are
alternativeremedies available to a party who is aggrieved by a counter-party's breach of a
reciprocal obligation. This is provided for in Article 1191 of the Civil Code, which partly reads:
Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case
one of the obligors should not comply with what is incumbent upon him. The
injured party may choose between the fulfillment and the rescission of the
obligation, with the payment of damages in either case. He may also seek
11
rescission, even after he has chosen fulfillment, if the latter should become
impossible.
xxxx
Specific performance is defined as [t]he remedy of requiring exact performance of a contract in

the specific form in which it was made, or according to the precise terms agreed upon. It
pertains to [t]he actual accomplishment of a contract by a party bound to fulfill it.
On the other hand, resolution is defined as the unmaking of a contract for a legally sufficient
reason x x x. [Resolution] does not merely terminate the contract and release the parties from
further obligations to each other, but abrogates the contract from its inception and restores the
parties to their original positions as if no contract has been made. Consequently, mutual
restitution, which entails the return of the benefits that each party may have received as a result
of the contract, is thus required. Notably, resolution under Article 1191 of the Civil Code will
not be permitted for a slight or casual breach, but only for such substantial and fundamental
violations as would defeat the very object of the parties in making the agreement. Ultimately, the
question of whether a breach of contract is substantial depends upon the attending
circumstances.
In this case, the HLURB-BOC, the OP, and the CA all pointed out that Buenviaje primarily
prayed for the remedy of specific performance - i.e., the completion of Unit 5, the subdivision of
Sps. Salonga's property into individual lots per unit, and the tum-over of Unit 5 as well as the
subdivided lot portion allocated to such unit to him and only prayed for the remedy of rescission
as an alternative remedy. Thus, it remains apparent that as between the two remedies made
available to him, Buenviaje, had, in fact, chosen the remedy of specific performance and
therefore, ought to be bound by the choice he had made. To add, [t]he fundamental rule is that
reliefs granted a litigant are limited to those specifically prayed for in the complaint; other reliefs
prayed for may be granted only when related to the specific prayer(s) in the pleadings and
supported by the evidence on record. Hence, based on this postulate, the lower tribunals could
hardly be faulted for granting the proper relief in accordance with what Buenviaje himself had
claimed.
Relatedly, it is observed that Buenviaje's alternative prayer for resolution is textually consistent
with that portion of Article 1191 of the Civil Code which states that an injured party may also
seek rescission, even after he has chosen fulfillment, if the latter should become impossible.
Nevertheless, the impossibility of fulfillment was not sufficiently demonstrated in the
proceedings conducted in this case. As the HLURB BOC pointed out, [t]here is no finding that
specific performance has become impossible or that there are insuperable legal obstacles to the
completion of the constructed units so as to justify [resolution]. In fact, as the CA contrarily
remarked, Buenviaje's main prayer [for specific performance] x x x appears to be the more
plausible course of action57 [s]ince the units covered by the disputed Contracts To Sell are
almost finished, and [have] most likely [been] complete[d].
With these in mind, the CA therefore correctly upheld the directive for Jebson to comply with its
obligations under the subject CTS with Buenviaje as prayed for by the latter. Failing to show any
cogent reason to hold otherwise, Buenviaje can no longer recant his primary choice of relief. His
prayer for resolution in the instant petition must perforce fail.
12
Nissan Car Lease Phils., Inc. v. Lica Management, Inc. and Proton Pilipinas, Inc.
G.R. No. 176986, January 13, 2016
Third Division, J. Jardeleza
(Obligations; remedies for breach of obligations; extra-judicial rescission; Article 1192)
Facts:
Lica Management Inc. (Lica) owns a property in Makati City. On June 24, 1994, Lica entered
into a lease contract with Nissan Car Lease Phils., Inc. (Nissan) for ten years with a monthly
rental of P308,000.00 and annual escalation rate of 10%. Subsequently, Nissan defaulted in
payment and its total rental arrearages amounted to P1,741,520.85. Thus, in May 1996, Nissan
and Lica verbally agreed to convert the arrearages into a debt to be covered by a promissory note
and twelve PDCs as monthly payments starting June 1996 until May 1997. Nissan defaulted
from June to October 1996. Thus, Lica informed Nissan that it was terminating their lease
contract and demanded Nissan to pay unpaid rentals and vacate the premises within five days
from notice.
In the meantime, Proton Pilipinas (Proton) sent Nissan a request to use the premises for ten days.
Nissan agreed and allowed Proton to make the necessary renovations even prior to the execution
of a sublease contract. Nissan and Lica failed to agree on a subleasing contract, which forced
Proton to enter into a lease contract with Lica since it already terminated its contract with Nissan.
Lica demanded Nissan to vacate the property. A few days after, Lica filed a complaint for sum of
money with damages against Nissan to recover the unpaid rentals with interest, penalties, and
damages. Nissan asserted that its failure to pay rent does not automatically result in the
termination of the Contract of Lease nor does it give Lica the right to terminate the same. Nissan
also informed Lica that since it was unlawfully ousted from the leased premises and was not
deriving any benefit therefrom, it decided to stop payment of the checks issued to pay the rent.
RTC found that Nissan purposely violated the terms of its contract with Lica when it failed to
pay the required rentals and contracted to sublease the premises without the latter's consent.
Under Article 1191 of the Civil Code, Lica was therefore entitled to rescind the contract between
the parties and seek payment of the unpaid rentals and damages. Nissan argued that there was no
valid extra-judicial rescission of the lease contract of Nissan with Lica. CA affirmed the ruling of
the RTC.
Issue:
W/N Lica validly rescinded extra-judicially its contract of lease with Nissan.
Held:
Yes. The extra judicial rescission is valid. It is clear from the records that NCLPI committed
substantial breaches of its Contract of Lease with LMI. Under Paragraph 2, NCLPI bound itself
to pay a monthly rental of P308,000.00 not later than the first day of every month to which the
rent corresponds. NCLPI, however, defaulted on its contractual obligation to timely and properly
pay its rent. Aside from non-payment of rentals, it appears that NCLPI also breached its
obligations under Paragraphs 4 and 5 of the Contract of Lease which prohibit it from subleasing
the premises or introducing improvements or alterations thereon without LMI's prior written
consent.
While it is true that NCLP1 and LMI's Contract of Lease does not contain a provision expressly
authorizing extrajudicial rescission, LMI can nevertheless rescind the contract, without prior
court approval, pursuant to Art. 1191 of the Civil Code.
Art. 1191 provides that the power to rescind is implied in reciprocal obligations, in cases where
one of the obligors should fail to comply with what is incumbent upon him. Otherwise stated, an
13
aggrieved party is not prevented from extrajudicially rescinding a contract to protect its interests,
even in the absence of any provision expressly providing for such right. The rationale for this
rule was explained in the case of University of the Philippines v. Delos Angeles wherein this
Court held:
The law definitely does not require that the contracting party who believes itself injured must
first file suit and wait for a judgment before taking extrajudicial steps to protect its interest.
Otherwise, the party injured by the other's breach will have to passively sit and watch its
damages accumulate during the pendency of the suit until the final judgment of rescission is
rendered when the law itself requires that he should exercise due diligence to minimize its own
damages (Civil Code, Article 2203)
Whether a contract provides for it or not, the remedy of rescission is always available as a
remedy against a defaulting party. When done without prior judicial imprimatur, however, it may
still be subject to a possible court review. The only practical effect of a contractual stipulation
allowing extrajudicial rescission is merely to transfer to the defaulter the initiative of instituting
suit, instead of the rescinder. In fact, the rule is the same even if the parties' contract expressly
allows extrajudicial rescission. The other party denying the rescission may still seek judicial
intervention to determine whether or not the rescission was proper.
14
Spouses Roberto and Adelaida Pen v. Spouses Santos and Linda Julian
G.R. No. 160408, January 11, 2016
(Obligation; Modes of extinguishment; Payment; dacion en pago)
Facts:
In 1986, spouses Julian obtained several loans from Adelaida Pen. Evidenced by two promissory
notes and secured by a REM over a property registered under the name of Santos. When the
loans become due and demandable, spouses Julian failed to pay despite several demands, forcing
Adelaida to institute foreclosure proceedings. Before she could file the foreclosure proceedings,
Linda offered the mortgaged property as payment in kind. The parties agreed to have the
property valued at P70,000.00. Thereafter, spouses Julian executed the Deed of Sale and after
spouses Pens payment of taxes, title was transferred to their name. In 1989 and in 1990, Linda
offered to repurchase the property but failed to give payment in the agreed dates. Linda offered
to pay P100,000.00 in cash as sign of good faith but spouses Pen refused to accept but instead, it
was deducted to the indebtedness of spouses Julian so that as of October 1997, their unpaid
balance amounted to P319,065.00. However, instead of paying the balance, spouses Julian
instituted an adverse claim and lis pendens and both were annotated at the back of the title.
Spouses Julians version of the story is different. According to them, the deed of absolute sale
had no consideration, undated, unfilled, and unnotarized. They also claimed that in December
1992 they offered to pay P150,000.00 but Adelaida refused and demanded P250,000.00. Linda
desisted and instead checked the property with the Register of Deeds. She discovered that the
land was already registered in the name of spouses Pen, which prompted Linda Julian to file an
adverse claim against spouses Pen. Spouses Pen argued that the transaction was a valid dacion en
pago. RTC ruled in favor of spouses Julian. Ca affirmed.
Issue:
W/N the transaction between spouses Pen and spouses Julian was a valid dacion en pago.
Held.
No. the transaction is not dacion en pago but a sale. Dacion en pago is in the nature of a sale
because property is alienated in favor of the creditor in satisfaction of a debt in money.For a
valid dacion en pago to transpire, however, the attendance of the following elements must be
established, namely: (a) the existence of a money obligation (b) the alienation to the creditor of
a property by the debtor with the consent of the former and (c) the satisfaction of the money
obligation of the debtor. To have a valid dacion en pago, therefore, the alienation of the property
must fully extinguish the debt. Yet, the debt of the respondents subsisted despite the transfer of
the property in favor of Adelaida.
15
Teresita I. Buenaventura v. Metropolitan Bank and Trust Company

G.R. No. 167082, August 3, 2016
(Contracts; fundamental characteristics of contracts; consensuality of contracts; contract of

adhesion)
Facts:
In 1997, Teresita Buenaventura executed two promissory notes of P1.5M each payable to MBTC
with interest. As of 1998, the PNs remain unpaid. MBTC filed action against Teresita for
recovery of said amounts. In her answer, Teresita claimed that she is a mere guarantor of her
nephew Imperial, who drew postdated checks against MBTC as partial payment of purchase
price of Imperials properties. Teresita claimed that when she rediscounted the checks, she was
required to execute the PNs. She also claimed that as a guarantor, she cannot be held liable
unless MBTC shall have exhausted all the properties of Imperial. RTC ruled in favor of MBTC
and ordered Teresita to pay P3.5M plus interest and penalties. CA affirmed with modifications as
to the interest and penalty.
Issue:
W/N Teresita shall be held liable for the promissory notes she executed because of the
rediscounting transaction with MBTC.
Held:
Yes. Teresita is liable for the amount in the promissory notes. The petitioner claims that the
promissory notes she executed were contracts of adhesion because her only participation in their
execution was affixing her signature, and that the terms of the promissory notes should
consequently be strictly construed against the respondent as the party responsible for their
preparation. In contrast, the respondent counters that the terms and conditions of the promissory
notes were clear and unambiguous; hence, there was no room or need for interpretation thereof.
What the petitioner advocates is for the Court to now read into the promissory notes terms and
conditions that would contradict their clear and unambiguous terms in the guise of such
promissory notes being contracts of adhesion. This cannot be permitted, for, even assuming that
the promissory notes were contracts of adhesion, such circumstance alone did not necessarily
entitle her to bar their literal enforcement against her if their terms were unequivocal. It is
preposterous on her part to disparage the promissory notes for being contracts of adhesion, for
she thereby seems to forget that the validity and enforceability of contracts of adhesion were the
same as those of other valid contracts.
As a rule, indeed, the contract of adhesion is no different from any other contract. Its
interpretation still aligns with the literal meaning of its terms and conditions absent any
ambiguity, or with the intention of the parties. The terms and conditions of the promissory notes
involved herein, being clear and beyond doubt, should then be enforced accordingly.
16
Vicente D. Cabanting and Lalaine V. Cabanting v. BPI Family Savings Bank, Inc.
G.R. No. 201927, February 17, 2016
Third Division, J. Peralta
(Contracts; fundamental characteristics of contracts; consensuality of contracts; contract of

adhesion)
Facts:
In 2003, the Cabantings bought on installmet basis from Diamond Motors Corporation a 2002
Mitsubishi Adventure SS MT worth P836,032.00, and for value received, the Cabantings signed,
executed, and delivered to Diamond motors a promissory note (PN) with chattel mortgage on the
said vehicle. On the day of the execution of the document, Diamond Motors, with notice to the
Cabantings, executed a deed of assignment, thereby assigning to BPI Family all its rights, title
and interest to the PN with chattel mortgage. Nine months thereafter, BPI Family filed a
complaint for replevin against the Cabantings praying that Cabantings be ordered to pay the
unpaid portion of the vehicles price with interest and damages. BPI Family alleged that
petitioners failed to pay three consecutive installments and despite written demand sent to
petitioners through registered mail, petitioners failed to comply with said demand to pay or to
surrender possession of the vehicle to BPI Family. The Cabantings alleged that they sold the
vehicle to one Abalos with the agreement that Abalos will pay the monthly installments, and
having defaulted, BPI should have sued Abalos instead of the Cabantings. The Cabantings also
claimed that BPI Family made no prior demand to make the obligation due and payable. RTC
ruled in favor of BPI Family. CA affirmed.
Issue:
W/N a prior demand is necessary to make the obligation of the Cabantings due and payable.
Held:
No. no prior demand was necessary to make petitioners' obligation due and payable. The
Promissory Note with Chattel Mortgage clearly stipulated that:
[i]n case of my/our [petitioners'] failure to pay when due and payable, any sum
which I/We x x x or any of us may now or in the future owe to the holder of this
note x x x then the entire sum outstanding under this note shall immediately
become due and payable without the necessity of notice or demand which I/We
hereby waive.
Petitioners argue that such stipulation should be deemed invalid as the document they executed
was a contract of adhesion. It is important to stress the Court's ruling in Dia v. St. Ferdinand
Memorial Park, Inc., to wit:
A contract of adhesion, wherein one party imposes a ready-made form of contract

on the other, is not strictly against the law. A contract of adhesion is as binding as
ordinary contracts, the reason being that the party who adheres to the contract is
free to reject it entirely. Contrary to petitioner's contention, not every contract of
adhesion is an invalid agreement.
In RCBC v. CA, the Court held that contracts of adhesion are not invalid per se;
they are not entirely prohibited. The one who adheres to the contract is in reality
free to reject it entirely; if he adheres, he gives his consent.
Verily, petitioners are bound by the aforementioned stipulation in the Promissory Note with
Chattel Mortgage waiving the necessity of notice and demand to make the obligation due and
payable. In Agner v. BPI Family Savings Bank, Inc, the Court ruled:
17
A provision on waiver of notice or demand has been recognized as legal and valid
in BPI v. CA, 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
ce1iain 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.
Clearly, as stated above, Article 1169 (1) of the Civil Code allows a party to waive the need for
notice and demand. Petitioners' argument that their liability cannot be deemed due and payable
for lack of proof of demand must be struck down.
18
Anecito Campos v. Bank of the Philippine Islands

G.R. No. 207597, May 30, 2016
(Contracts; fundamental characteristics; autonomy of contracts; Article 1306)
Facts:
In 1980, Campos mortgaged 14 lots in favor of FEBTC, now merged with BPI to secure a P1M
loan, and among these lots was the then vacant lot subject of this case. Campos constructed a
two-story building on the said lot allegedly with knowledge and consent by the bank. Campos
failed to pay his loan, which ballooned to P11M. Subsequently, BPI moved for extrajudicial
foreclosure of the mortgaged lots and a writ of possession was later on issued to BPI in 2006.
Campos filed a Motion for the Suspension of the Implementation of the Writ of Possession
and/or to Allow Mortgagor to Present Evidence of Good Faith dated February 12, 2007. Campos
claimed that he constructed the building in good faith and with banks consent and therefore he
has the right to retain possession of the subject lot until the bank reimburses him, citing Articles
456, 448, and 450 of the Civil Code. BPI opposed the motion arguing that the purchaser in a
foreclosure sale has no obligation to reimburse the mortgagor for the value of the improvements.
More importantly, the Bank cited the Mortgage Contract which has a stipulation that says the
mortgage includes all the buildings and improvements now existing or which may hereafter be
erected or constructed thereon x x x. RTC denied the motion filed by Campos. CA affirmed.
Issue:
W/N Campos has the right of retention of the subject lot together with the improvements he
made thereon until BPI reimburses him of his expenses.
Held:
No. BPI is the lawful owner of the subject lot and thus Campos has no right of retention nor does
BPI have the obligation to reimburse Campos. The mortgage contracts themselves specifically
include all the buildings and improvements now existing or which may hereafter be erected or
constructed [on the properties] as part of the mortgage. This renders the value of the
improvements and Campos' alleged good faith immaterial; he voluntarily included the building
when he entered into the mortgage.
Article 1306. The contracting parties may establish such stipulations, clauses,
terms and conditions as they may deem convenient provided they are not contrary
to law, morals, good customs, public order, or public policy.
This Civil Code provision asserts the Autonomy of Contracts. Contractual obligations have the
force of law between the parties and should be complied with in good faith. The Courts will not
rescue a litigant from his bad bargains, protect him from unwise investments, relieve him from
disadvantageous contracts, or annul the effects of his foolish acts unless there has been a
violation of law.
19
Century Properties, Inc. v. Edwin J. Babiano and Emma B. Concepcion

G.R. No. 220978, July 5, 2016
First Division, J. Perlas-Bernabe
(Contracts; fundamental characteristics; autonomy of contracts)
Facts:
In 2002, Babiano was hired by CPI as Director of Sales and was eventually appointed as VP for
Sales. His employment contract contained a Confidentiality of Documents and Non-Compete
Clause, which, among others, barred him from disclosing confidential information and from
working in any business enterprise that is in direct competition with CPI while employed and for
a period of one year from date of resignation or termination from CPI. Moreover, should
Babiano breach any of the terms thereof, his forms of compensation, including commissions and
incentives will be forfeited.
After receiving reports that Babiano provided a competitor with information regarding CPIs
marketing strategies, spread false information regarding CPI and its projects, recruited CPI's
personnel to join the competitor, and for being AWOL for 5 days CPI sent Babiano a Notice to
Explain directing him to explain why he should not be charged with disloyalty, conflict of
interest, and breach of trust and confidence for his actuations. As reply, Babiano tendered his
resignation and revealed that he had been accepted as VP of First Global, a competitor of CPI.
Babiano thereafter was served a Notice of Termination.
Sometime thereafter, Babiano filed a complaint for non-payment of commissions and damages
against CPI before the NLRC claiming that despite repeated demands, the release of his
commission remained unheeded. CPI claimed that it validly withheld Babianos commission as
they were deemed forfeited for violation of the Confidentiality and Non-Compete Clause. Labor
Arbiter ruled in CPIs favor holding that Babianos acts are blatant violations of the
Confidentiality and Non-Compete Clause, which resulted in the forfeiture of his commissions.
The NLRC, however, ruled that the forfeiture of all earned commissions of Babiano under the
Confidentiality of Documents and Non-Compete Clause is confiscatory and unreasonable and
hence, contrary to law and public policy. CA affirmed NLRC ruling.
Issue:
W/N the Confidentiality and Non-Compete Clause is valid and binding as to hold Babiano liable
for his acts and therefore validates the forfeiture of his commissions.
Held:
Yes. The Confidentiality and Non-Compete Clause is valid and binding between Babiano and
CPI justifying CPIs forfeiture of Babaianos commissions. Article 1370 of the Civil Code
provides that if the terms of a contract are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of its stipulations shall control. In Norton Resources and
Development Corporation v. All Asia Bank Corporation, the Court had the opportunity to
thoroughly discuss the said rule as follows:
The rule is that where the language of a contract is plain and unambiguous, its
meaning should be determined without reference to extrinsic facts or aids. The
intention of the parties must be gathered from that language, and from that
language alone. Stated differently, where the language of a written contract is
clear and unambiguous, the contract must be taken to mean that which, on its
face, it purports to mean, unless some good reason can be assigned to show that
the words should be understood in a different sense. x x x
20
Thus, in the interpretation of contracts, the Court must first determine whether a provision or
stipulation therein is ambiguous. Absent any ambiguity, the provision on its face will be read as
it is written and treated as the binding law of the parties to the contract.
In the case at bar, CPI primarily invoked the Confidentiality of Documents and Non-Compete
Clause found in Babiano's employment contract to justify the forfeiture of his commissions,
viz.:
Confidentiality of Documents and Non-Compete Clause
xxx
And in order to ensure strict compliance herewith, you shall not work for
whatsoever capacity, either as an employee, agent or consultant with any person
whose business is in direct competition with the company while you are employed
and for a period of one year from date of resignation or termination from the
company.
xxx
Finally, if undersigned breaches any terms of this contract, forms of compensation

including commissions and incentives will be forfeited.
Verily, the foregoing clause is not only clear and unambiguous in stating that Babiano is barred
to work for whatsoever capacity x x x with any person whose business is in direct competition
with [CPI] while [he is] employed and for a period of one year from date of [his] resignation or
termination from the company, it also expressly provided in no uncertain terms that should
Babiano [breach] any term of [the employment contract], forms of compensation including
commissions and incentives will be forfeited. More significantly, as CPI's Vice President for
Sales, Babiano held a highly sensitive and confidential managerial position as he was tasked,
among others, to guarantee the achievement of agreed sales targets for a project and to ensure
that his team has a qualified and competent manpower resources by conducting recruitment
activities, training sessions, sales rallies, motivational activities, and evaluation programs.
Hence, to allow Babiano to freely move to direct competitors during and soon after his
employment with CPI would make the latter's trade secrets vulnerable to exposure, especially in
a highly competitive marketing environment. As such, it is only reasonable that CPI and Babiano
agree on such stipulation in the latter's employment contract in order to afford a fair and
reasonable protection to CPI. Indubitably, obligations arising from contracts, including
employment contracts, have the force of law between the contracting parties and should be
complied with in good faith. Corollary thereto, parties are bound by the stipulations, clauses,
terms, and conditions they have agreed to, provided that these stipulations, clauses, terms, and
conditions are not contrary to law, morals, public order or public policy, as in this case.
21
IBM Philippines, Inc. v. Prime System Plus, Inc.

G.R. No. 203192, August 15, 2016
(Contracts; form of contracts; special form as to validity; interst; Article 1956)
Facts:
IBM entered into an agreement with PSP where IBM will deliver 45 ATMs and computer
hardware for P24M. IBM then instituted a complaint for collection of sum of money against PSP
for P45M representing PSPs unpaid obligation with 3% monthly interest. RTC rendered in
favor of IBM ordering the payment of P45M plus 6% nterest per annum. RTC found the 3%
interest which were evidenced by invoices late payments or payments after thirty days of
delivery. CA reversed citing Article 1956 of the Civil Code. CA found that there is no showing
that the parties had actually agreed on the imposition of the 3% monthly interest for invoices
which remained unpaid 30 days from its delivery. CA imposed a penalty of 6% per annum.
Issue:
W/N the imposition of 3% monthly interest by IBM is a valid stipulation under Article 1956 of
the Civil Code
Held:
No. It has been a long-standing rule that for interest to become due and demandable, two
requisites must be present: (1) that there must be an express stipulation for the payment of
interest and (2) the agreement to pay interest is reduced in writing. Here, petitioner insists that
there was an express agreement for a 3% monthly interest, which petitioner placed in writing in
its letter dated December 29, 1997. Petitioner has gone through great lengths to attribute
respondent's alleged silence, coupled with, respondent's request for the reduction of monthly
interest to the latter's express agreement to a 3% monthly interest.
Using the contents of the letter, this Court finds that the evidence points to respondent's lack of
consent to a 3% monthly interest. Petitioner adamantly claims that respondent's act of requesting
for a lower interest rate shows the latter's agreement to a 3% monthly interest. Such an askewed
reasoning escapes us especially here where respondent's authorized representative never
assented to petitioner's letter. To accept petitioner's misplaced argument that the parties mutually
agreed to a 3% monthly interest when respondent subsequently ordered ATMs despite receiving
petitioner's letter imposing a 3% monthly interest will render the second condition that the
agreement be reduced in writing - futile. Although respondent did agree to the imposition of
interest per se, the fact that there was never a clear rate of interest still leaves room to guess as to
how much interest respondent will pay. This is precisely the reason why Article 1956 was
included in the Civil Code - so that both parties clearly agree to and are fully aware of the price
to be paid in a contract.
In the absence of agreement as to the exact rate of interest, the CA properly applied the legal rate
of 6% annual interest following our ruling in Eastern Shipping Lines, Inc. v. Court of Appeals
and the Bangko Sentral ng Pilipinas MB Circular No. 799, series of 2013.
22
The Roman Catholic Bishop of Tuguegarao v. Florentina Prudencio, et al.

G.R. No. 187942, September 7, 2016
Third Division, J. Jardeleza
(Contracts; Kinds of contracts; void contracts; Article 1409)
Facts:
Felipe married twice during his lifetime. With his first wife, Elena, he had five children. With his
second wife, Teodora, he had two children. During the marriage of Felipe and Elena, they
acquired a 13ha parcel of land in Cagayan. When Elena died, Felipe and her children became co-
owners of the property. Felipe then died intestate during his second marriage. Upon his death, his
two children from second marriage executed a Deed of Extra-Judicial Partition of the Estate to
Felipe with waiver of rights in favor of Teodora. The Cagayan lot was recognized in the deed
that it was acquired during the first marriage but there were no heirs to inherit the property
except the living heirs, Teodora, and her two children, Prudencio and Leonora. The deed also
provided that the children are waiving their rights in favor of their mother, Teodora.
Accordingly, the Cagayan lot was transferred to Teodoras name.
Teodora then sold the Cagayan lot to spouses Cepeda (also respondents), who in turn sold the lot
to the Roman Catholic Bishop of Tuguegarao (RCBT). The children and grandchildren of Felipe
by his first marriage (respondents) filed a Complaint for Partition with Reconveyance alleging
that they are the children of Felipe and upon the death of their mother Elena, first wife of Felipe,
they became co-owners of the Cagayan lot. The respondents also alleged that they were
fraudulently deprived of their rightful shares in the estate of Felipe and Elena when the Extra
Judicial Partition declared Teodora as the sole owner of the Cagayan lot.
Petitioner countered that Spouses Cepeda were in possession of the Cagayan lot at the time they
offered it for sale. It denied knowledge of the existence of any defect over Spouses Cepeda's title.
It averred that it was an innocent purchaser for value. On the other hand, spouses Cepeda
maintained that their title over the Cagayan lot was clean and that they had no knowledge that
other persons had interest on it because Teodora's title over the property was clean. They asserted
that like petitioner, they were purchasers for value and in good faith.
Issue:
W/N the Extra-Judicial Partition of the Estate of Felipe is valid and binding on the heirs of Elena,
thus validly causing the transfer of ownership of the Cagayan lot to Teodora.
Held:
No. The extra-judicial partition is not valid and binding. It also does not transfer ownership of
the land to Teodora. Articles 979, 980 and 981 of the Civil Code of the Philippines (Civil Code)
state that all the children of the deceased shall inherit from him and by implication should
participate in the settlement of his/her estate, to wit:
Art. 979. Legitimate children and their descendants succeed the parents and other
ascendants, without distinction as to sex or age, and even if they should come
from different marriages.
An adopted child succeeds to the property of the adopting parents in the manner
as a legitimate child.
Art. 980. The children of the deceased shall always inherit from him in their own
right, dividing the inheritance in equal shares.
23
Art. 981. Should children of the deceased and descendants of other children who
are dead, survive, the former shall inherit in their own right, and the latter by right
of representation.
Thus, the children of Felipe in his two (2) marriages should be included in the execution of the
Extra-Judicial Partition. In this case, it is undisputed that respondents-appellees were children of
Felipe by his first marriage. Teodora, Prudencio, Jr. and Leonora did not deny respondents-
appellees' relation with Felipe.
Despite this, however, Teodora, Prudencio, Jr. and Leonora declared in the Extra- Judicial
Partition that they are the only living heirs of Felipe by operation of law. They claimed that
Felipe had no child with his first wife Elena, in effect depriving respondents-appellees of their
rightful shares in the estate of their parents. They arrogated upon themselves not only the share
of Felipe in the Cagayan lot but also the shares belonging to respondents-appellees.
Petitioner, however, submits that the Extra-Judicial Partition is not void because it does not fall
within any of the inexistent and void contracts under Article 1409 of the Civil Code. Petitioner is
not correct. In Constantino v. Heirs of Pedro Constantino, Jr., we declared two (2) deeds of
extrajudicial settlements as void and inexistent for having a purpose or object which is contrary
to law. The intention of the signatories in both deeds is to exclude their co-heirs of their rightful
share in the estate of the deceased. Similarly, in the present case, Teodora, Prudencio, Jr. and
Leonora acted in bad faith when they declared that they are the only living heirs of Felipe,
despite knowing that Felipe had children in his first marriage. It is well-settled that a deed of
extrajudicial partition executed without including some of the heirs, who had no knowledge of
and consent to the same, is fraudulent and vicious.
Thus, the Extra-Judicial Partition is void under Article 1409 ( l) or those whose cause, object or
purpose is contrary to law, morals, good customs, public order or public policy. As a
consequence, it has no force and effect from the beginning, as if it had never been entered into
and it cannot be validated either by time or ratification.
24
Desiderio Ranara, Jr. v. Zacarias de los Angeles, Jr.

G.R. No. 200765, August 08, 2016
Third Division, J. Reyes
(Contracts; kinds of contracts; void contracts; in pari delicto doctrine; Articles 1411, 1412)
Facts:
In 1989, Parada loaned form Zacarias, Sr. P60,000.00 to finance her migration to Canada
payable within a period of ten years. Zacarias, Sr. informed Parada that the money came from his
son, Zacarias, Jr. As security, Parada mortgaged a parcel of agricultural land. It was agreed upon
by the parties that Zacarias, Jr. would take possession of and farm the land as payment for the
loan interest. Parada executed Deed of Sale with Right to Repurchase. In 2001, Zacarias, Sr. fell
sick and Zacarias, Jr. pleaded to Noel, Paradas son, to repurchase the property to finance his
fathers hospital and medical bills. Parada paid P40,000.00 but Zacarias, Jr. found the amount
unacceptable so he returned the money to Parada.
Later, Zacarias, Jr. sold the land to Ranara, Jr. for P300,000.00 evidenced by a deed of sale.
Zacarias, Jr. sent Parada a letter giving her 15 days to repurchase. Parada insisted that the sale
was not valid and tendered P60,000.00 as payment for the loan but Zacarias, Jr. refused to
accept. Parada also alleged that Zacarias, Jr. fraudulently register the property and thus Ranara
has no rights to the property.
RTC ruled in favor of Parada. It found that Parada and the respondent entered into an Equitable
mortgage pursuant to Article 1602(6)16 of the Civil Code. It denied the petitioner and the
respondent's claim for reimbursement from Parada. Moreover, when the petitioner purchased the
land from the respondent, he knew of the property's status. He knew that he was dealing with a
registered land and the fact that title to the land reflected Parada as the owner. The petitioner
knew of the risks involved but continued with the sale. The RTC stated that [h]e who comes to
Court must have clean hands. Each of the parties must bear his own loss. It denied the
petitioner's claim of reimbursement for the improvements he had allegedly introduced in the land
because he acquired the property in bad faith. CA affirmed.
Issue:
W/N Ranara is an innocent purchaser for value and thus entitled to reimbursement form
respondent
Held:
No. Ranara is not an innocent purchaser for value. The petitioner cannot claim reimbursement
for any expense incurred in the improvements on the lot. Both respondent and petitioner are both
in bad faith. A purchaser of land that is in the actual possession of the seller must make some
inquiry in the rights of the possessor of the land. The rule of caveat emptor requires the purchaser
to be Ware of the supposed title of the vendor and one who buys without checking the vendor's
title takes all the risks and losses consequent to such failure.
As a doctrine in civil law, the rule on pari delicto is principally governed by Articles 1411 and
1412 of the Civil Code, which state that:
Article 1411. When the nullity proceeds from the illegality of the cause or object
of the contract, and the act constitutes a criminal offense, both parties being in
pari delicto, they shall have no action against each other, and both shall be
prosecuted.
xxxx
25
Article 1412. If the act in which the unlawful or forbidden cause consists does not
constitute a criminal offense, the following rules shall be observed:
1. When the fault is on the part of both contracting parties, neither may recover
what he has given by virtue of the contract, or demand the performance of the
other's undertaking
xxxx
Article 1412 of the Civil Code that breathes life to the doctrine speaks of the rights and
obligations of the parties to the contract with an illegal cause or object which does not constitute
a criminal offense. It applies to contracts which are void for illegality of subject matter and not to
contracts rendered void for being simulated, or those in which the parties do not really intend to
be bound thereby. Specifically, in pari delicto situations involve the parties in one contract who
are both at fault, such that neither can recover nor have any action against each other.
Here, there is neither an illegal cause nor unlawful cause which would necessitate the application
of Articles 1411 and 1412 of the Civil Code. The petitioner is mistaken in the application of the
doctrine of in pari delicto.
26
Mactan Cebu International Airport Authority v. Heirs of Gavina Ijordan

G.R. No. 173140, January 11, 2016
(Contracts; kinds of contracts as to validity; unenforceable contracts; Article 1317)
Facts:
In 1957, Julian Cuizon (Julian), one of the heirs of Gavina Ijordan, executed a Deed of
Extrajudicial Settlement and Sale of a parcel of land in Lapu-Lapu City in favor of Civil
Aeronautics Administration (CAA). The lot was transferred to MCIAA by virtue of RA 6958. In
1980, the respondents caused the judicial reconstitution of the OCT covering the subject land and
an original certificate of title was issued to the other heirs of Gavina Ijordan. Thereafter, the heirs
asserted before the MCIAA that they were the lawful owners of the lot and that they had not sold
their shares in the lot nor authorized Julian to sell their shares to CAA. The failure of the
respondents to surrender the owners copy of the OCT prompted MCIAA to sue them for the
cancellation of their title alleging that the certificate of title held by the heirs of Gavina Ijordan
confers no rights as the lot was already sold to the Government in 1957. Citing Article 1317 of
the Civil Code, the heirs of Gavina Ijordan argued that the sale was unenforceable against them
because it was only Julian who had executed the same without obtaining their consent or
authority as co-heirs. RTC ruled in favor of the heirs of Gavina Ijordan stating that only the share
of Julian was sold to MCIAA in 1957.
Issue:
W/N the sale of Julian of the lot to MCIAA is unenforceable against the co-owners who do not
give their express authority to the sale.
Held:
Yes. The conveyance by Julian of the entire property pursuant to the Deed did not bind the
respondents for lack of their consent and authority in his favor. As such, the Deed had no legal
effect as to their shares in the property. Article 1317 of the Civil Code provides that no person
could contract in the name of another without being authorized by the latter, or unless he had by
law a right to represent him the contract entered into in the name of another by one who has no
authority or legal representation, or who has acted beyond his powers, is unenforceable, unless it
is ratified, expressly or impliedly, by the person on whose behalf it has been executed, before it
is revoked by the other contracting party. But the conveyance by Julian through the Deed had
full force and effect with respect to his share of 1/22 of the entire property consisting of 546
square meters by virtue of its being a voluntary disposition of property on his part. As ruled in
Torres, Jr. v. Lapinid, x x x even if a co-owner sells the whole property as his, the sale will affect
only his own share but not those of the other co-owners who did not consent to the sale. This is
because the sale or other disposition of a co-owner affects only his undivided share and the
transferee gets only what would correspond to his grantor in the partition of the thing owned in
common.
27
Kabisig Real Wealth Dev., Inc. and Fernando C. Tio v. Young Builders Corporation
G.R. No. 212375, January 25, 2017
Second Division, J. Peralta
(Contracts; essential elements; classification as to form; Articles 1318, 1356)
Facts:
In April 2001, Kabisig Real Wealth Dev., Inc. (Kabisig), through Ferdinand Tio (Tio),
contracted the services of Young Builders Corporation (Young Builders) to supply labor, tools,
equipment, and materials for the renovation of its building in Cebu City. Young Builders then
finished the work in September 2001 and billed Kabisig for P4.123M. However, despite
numerous demands, Kabisig failed to pay. It contended that no written contract was ever entered
into between the parties and it was never informed of the estimated cost of the renovation. Thus,
Young Builders filed an action for Collection of Sum of Money against Kabisig. RTC ruled in
favor of Young Builders and ordered Kabisig to pay Young Builders for the services rendered
with interest and damages.
Issue:
W/N there was a perfected contract between Kabisig and Young Builders
Held:
Yes. Under the Civil Code, a contract is a meeting of minds, with respect to the other, to give
something or to render some service. Accordingly under Article 1318, for a contract to be valid,
it must have the following essential elements: (1) consent of the contracting parties; (2) object
certain, which is the subject matter of the contract; and (3) cause of the obligation which is
established. Consent must exist, otherwise, the contract is non- existent. Consent is manifested
by the meeting of the offer and the acceptance of the thing and the cause, which are to constitute
the contract. By law, a contract of sale, is perfected at the moment there is a meeting of the
minds upon the thing that is the object of the contract and upon the price. Indeed, it is a
consensual contract which is perfected by mere consent.
Further, Kabisig's claim as to the absence of a written contract between it and Young Builders
simply does not hold water. It is settled that once perfected, a contract is generally binding in
whatever form, whether written or oral, it may have been entered into, provided the
aforementioned essential requisites for its validity are present. Article 1356 of the Civil Code
provides that, contracts shall be obligatory in whatever form they may have been entered into,
provided all the essential requisites for their validity are present. xxx There is nothing in the law
that requires a written contract for the agreement in question to be valid and enforceable.
28
Timoteo Bacalso and Diosdada Bacalso v. Gregoria B. Aca-ac, Eutiquia B. Aguila, Julian
Bacus, and Evelyn Sychangco
G.R. No. 172919, January 13, 2016
(Contracts; essential elements of contracts; Article 1318)
Facts:
The Bacus siblings were the registered owners of a parcel of land in Talisay, Cebu, which they
inherited from their mother, Matea. In 1987, the Bacus sinlings executed a Deed of Absolute
Sale conveying a portion of the lot in favor of their cousin, Timoteo, for P8,000.00. In 1988,
Timoteo, together with his siblings and some of his cousins filed a complaint for declaration of
nullitu of documents, certificates of title, reconveyance of real property and other damages
against Bacus and four other persons claiming that they are co-owners of 3/4 of the lot because
Matea paid for the property for and in behalf of her brother, Alejandro (father of petitioner
timoteo) and sisters Perpetua and Liberata. RTC found that Matea was the sole owner of the
subject property. CA affirmed.
Petitioners then filed another complaint for declaration of nullity of contract and claimed
ownership over the lot through the DOAS. They also alleged that after partitioning the lot
without their knowledge, the Bacus siblings sold a portion of the lot to Sychangco and a TCT
was issued in her name. Bacus siblings claimed that there was no sale between them and the
petitioners because petitioners failed to pay the purchase price. On her part, Sychangco claimed
that she is a buyer in good faith and for valaue. RTC declared the DOAS void for lack of
consideration. RTC held that even granting that the sale between the Bacus siblings and the
petitioners was valid, the petitioners still cannot ask for the rescission of the sale of the disputed
portion to Sychangco as the latter was a buyer in good faith, thus has a better right to the
property. CA affirmed.
Issue:
W/N the deed of absolute sale executed between Bacus siblings and petitioners is null and void
for failure or want of consideration.
Held:
Yes. The DOAS is null and void for want of consideration. Under the Civil Code, a contract is a
meeting of minds, with respect to the other, to give something or to render some service. Article
1318 provides:
Art. 1318. There is no contract unless the following requisites concur:
1. Consent of the contracting parties;

2. Object certain which is the subject matter of the contract;
3. Cause of the obligation which is established.
In the case at bar, the petitioners argue that the Deed of Absolute Sale has all the requisites of a
valid contract. The petitioners contend that there is no lack of consideration that would prevent
the existence of a valid contract. They also claim that even assuming that they failed to pay the
purchase price, such failure does not render the sale void for being :fictitious or simulated, rather,
there is only non-payment of the consideration within the period agreed upon for payment.
Contrary to the petitioners' claim, this is not merely a case of failure to pay the purchase price
which can only amount to a breach of obligation with rescission as the proper remedy. As
correctly observed by the RTC, the disputed sale produces no effect and is considered void ab
29
initio for failure to or want of consideration since the petitioner failed to pay the consideration
stipulated in the Deed of Absolute Sale.
It must be stressed that the present case is not merely a case of failure to pay the purchase price,
as [the petitioners] claim, which can only amount to a breach of obligation with rescission as the
proper remedy. What we have here is a purported contract that lacks a cause - one of the three
essential requisites of a valid contract. Failure to pay the consideration is different from lack of
consideration. The former results in a right to demand the fulfillment or cancellation of the
obligation under an existing valid contract while the latter prevents the existence of a valid
contract.
Well-settled is the rule that where there is no consideration, the sale is null and void ab initio. In
Spouses Lequin v. Spouses Vizconde, the Court ruled that:
There can be no doubt that the contract of sale or Kasulatan lacked the essential
element of consideration. It is a well-entrenched rule that where the deed of sale
states that the purchase price has been paid but in fact has never been paid, the
deed of sale is null and void ab initio for lack of consideration.
30
Philippine Science High School - Cagayan Valley Campus v. PIRAA Construction

Enterprises
G.R. No. 204423, September 14, 2016
(Contracts; breach of contractual obligation; quantum meruit principle)
Facts:
PIRRA (general contractor) filed with CIAC a complaint for damages against PSHS Nueva
Vizcaya (government academic institution) relative to the construction contracts for PSHS
particularly on Project C (Academic Building II Phase I, Boys Dormitory Building Phase I,
and School Canteen Phase I). Here, PIRAA requested the suspension of the construction of the
canteen because PSHS decided to relocate the canteen site. PSHS granted the request. PIRAA
also requested a time suspension in lieu of the relocation but PSHS said that it was not the
solution as there are no structural changes in the design. PSHS directed PIRAA to file variation
order with time extension. The agreement was PIRAA would submit another drawing plan to the
PSHS consultant, which would evaluate PIRAAs claim for extension. The PSHS consultant in
turn, will visit the site and will submit to PIRAA a detailed drawing of the site for the variation
order, but consultant failed to do so. During this period, PSHS informed PIRAA that it was
terminating the Project C contract because of the latters delay, default, and abandonment.
PIRRA contended that the termination of the contract is unjustified. It stressed that PSHS failed
to give it the intended revisions of the building plan for Project C as well as the necessary
documents to secure a building permit for the project. As a result, Project C was stopped and
PIRRA incurred a slippage. For its part, PSHS countered that it validly terminated the contract
for Project C. CIAC ruled in favor of PIRAA holding PSHS liable for delay in submitting
revised drawings and for giving extra work to PIRAA. On appeal, CA partially affirmed with
modifications. CA ruled that project C was validly terminated, however, PSHS was ordered to
pay for the value of the work done so far.
Issue:
W/N PSHS validly terminated its contract with PIRAA for Project C.
Held:
Yes. The contract is validly terminated. Pursuant to the General Conditions of Contract, PSHS
may terminate the contract if PIRRA incurs delay, abandons the project, causes stoppage of work
without the authority of PSHS, among other grounds. Indeed, by reason of PIRRAs delay,
suspension of work without any approval from PSHS, and abandonment of the project, PSHS has
sufficient basis to terminate the contract for Project C.
The Court, nonetheless, agrees with the CA that PIRRA is entitled to the value of the work done
on Project C pursuant to the principle of quantum meruit and to avoid unjust enrichment on the
part of PIRRA. Quantum meruit means that, in an action for work and labor, payment shall be
made in such amount as the plaintiff reasonably deserves x x x as it is unjust for a person to
retain any benefit without paying for it. Here, records show that PIRRA had a 25.25 %
accomplishment on Project C. To deny payment thereof would result in unjust enrichment of
PSHS at the expense of PIRRA. Hence, PSHS must pay PIRRA the value of the work done on
Project C.
31
Thelma Rodriguez, joined by her husband v. Spouses Jaime Sioson and Armi Sioson, et al.
G.R. No. 199180, July 27, 2016
(Sales; contract of sale; contract to sell; double sales)
Facts:
In 1997, the Municipality of Orani, Bataan purchased from Neri an area of about 1.7ha to be
used as extension of public market. The lot was subdivided into five lots and Neri still holds
absolute title of two out of the five lots, and subsequently the lots were registered in Neris name
but the owners duplicate copies remain in the possession of the municipality pending Neris
payment for the share in the expenses of subdividing the lot. Neri claimed that the then
municipal Mayor Zuniga suggested to sell the lot to Thelma and later on it would be
expropriated. Thelma, however, failed to pay his obligations to the lot and was only able to pay
half of the purchase price.
In 2001, Thelma caused the annotation of an adverse claim on the lot being sold to him but she
saw an announcement that a new Orani Common Terminal would be built on the said lot. Thus,
Thelma file a complaint for injunction. In 2002, Neri executed an affidavit claiming that the
owners copy of the two lots were lost, which was annotated in the original copies. Neri then
caused the cancellation of Thelmas adverse claim and caused the reconstitution of new owners
copy of TCTs over the two lots. Thereafter, new copies were issued and Neri sold the first lot to
spouses Sioson, et al. A SPA was executed by a certain Violeta in favor of Neri for the purpose.
Upon learning the second sale, Thelma filed a complaint for the Declaration of Nullity of te
Second Sale against spouses Sioson, et al. The respondents countered that they are innocent
purchasers for value having bought the lot at the time when Thelma's adverse claim was already
cancelled. While they admit Thelma's possession of the subject property, they, however, qualify
that possession is being contested in a separate action for forcible entry.
RTC ruled in favor of Thelma holding that the second deed of sale entered into by Neri with the
respondents and the subsequent TCT issued are null and void. CA reversed holding that the
contract between Neri and Thelma was a mere contract to sell and not a contract of sale; hence,
there was no double sale.
Issue:
W/N the contract between Neri and Thelma is a contract to sell and not a contract of sale.
Held:
Yes. The resolution of this case basically rests on the determination of whether the transaction
between Neri and Thelma is a contract of sale or a contract to sell. The rule on double sale, as
provided in Article 1544 of the Civil Code, does not apply to a case where there was a sale to
one party of the land itself while the other contract was a mere promise to sell the land or at most
an actual assignment of the right to repurchase the same land.
The real character of the contract is not the title given, but the intention of the parties. In this
case, there exist two deeds of absolute sale. Though identically worded, the first contract was
undated, not notarized, signed only by Neri, and was presented in Civil Case No. 7394 for
Injunction, while the second deed was dated April 10, 1997, notarized on September 5, 1997,
signed by both Neri and Thelma, and was presented in Civil Case No. 7664 for Declaration of
Nullity of Deed of Sale and Title.
32
In determining the nature of the agreement between Thelma and Neri, the CA took note of these
two documents, and, coupled with Thelma's own admissions, correctly found that it was a mere
contract to sell.
Despite the denomination of their agreement as one of sale, the circumstances tend to show that
Neri agreed to sell the subject property to Thelma on the condition that title and ownership
would pass or be transferred upon the full payment of the purchase price. This is the very nature
of a contract to sell, which is a bilateral contract whereby the prospective seller, while expressly
reserving the ownership of the property despite delivery thereof to the prospective buyer, binds
himself to sell the property exclusively to the prospective buyer upon fulfillment of the condition
agreed upon, i.e., the full payment of the purchase price. As stated by the Court, the agreement
to execute a deed of sale upon full payment of the purchase price shows that the vendors
reserved title to the subject property until full payment of the purchase price.
Moreover, the alleged delivery of the property, even if true, is irrelevant considering that in a
contract to sell, ownership is retained by the registered owner in spite of the partial payment of
the purchase price and delivery of possession of the property. Thus, in Roque v. Aguado, the
Court ruled that since the petitioners have not paid the final installment of the purchase price, the
condition which would have triggered the parties' obligation to enter into and thereby perfect a
contract of sale cannot be deemed to have been fulfilled consequently, they cannot validly
claim ownership over the subject portion even if they had made an initial payment and even took
possession of the same.
Accordingly, the CA did not commit any reversible error in concluding that the contract
between Thelma and Neri was a mere contract to sell, the transfer of ownership over Lot 398-A
being conditioned on Thelma's full payment of the purchase price. Having failed to pay the
purchase price in full, Thelma cannot claim ownership over Lot 398-A and Neri is not legally
proscribed from alienating the same lot to other buyers.
33
Joey R. Pea, v. Jesus Delos Santos and the Heirs of Rosita Delos Santos Flores
G.R. No. 202223, March 02, 2016
(Sales; Capacity of the contracting parties; Article 1491)
Facts:
Jesus and Rosita were the judgment awardees of the 2/3 portion of four adjoining lots in Boracay
Island in Civil Case No. 3683. The losing parties in the case appealed the judgment to the CA but
such was dismissed. Thus, it was brought to the SC via petition for review on certiorari. SC
remanded the case to Kalibo RTC for execution proceedings, during which a Motion for
Substitution with a Motion for Writ of Execution and Demolition was filed by Pea averring that
he is the transferee of Jesus and Rositas adjudged allotments over the subject lots. He claimed
that he bought the same from Atty. Robiso who, in turn, acquired the properties from Jesus and
Rosita through assignment and sale. Pea claimed that the conveyance made by Jesus and Rosita
in favor of Atty. Robiso was null and void for being a prohibited transaction because the latter
was their counsel in the case.
RTC ruled that Jesus and Rosita lost their standing in the case upon the conveyance of their
adjudged 2,000sqm portion in favor of Atty. Robiso whose ownership rights were afterwards
acquired by Pea. The RTC upheld that the conveyance made by Jesus and Rosita in favor of
Atty. Robiso is valid since it was not made during the pendency of litigation but after judgment
has been rendered. CA reversed the RTC and ruled that the conveyance made by Jesus and
Rosita in favor of Atty. Robiso was null and void because it is a prohibited transaction under
Article 1491(5) of the Civil Code. When the two Deeds of Sale and Confirmation of Sale in
favor of Atty. Robiso were executed, the case was still pending with the Supreme Court, before
which Jesus and Rosita were still represented by Atty. Robiso.
Issue:
W/N the sale of Jesus and Rosita of the parcel of land to Atty. Robiso is a prohibited sale under
Article 1491(5) of the Civil Code thus making the transfer to Pea void.
Held:
Yes. The basis of Pea's motion for substitution is infirm because the lots were transferred to his
predecessor-in-interest, Atty. Robiso, through a prohibited sale transaction. Article 1491(5) of
the Civil Code expressly prohibits lawyers from acquiring property or rights that may be the
object of any litigation in which they may take part by virtue of their profession, thus:
Art. 1491. The following persons cannot acquire by purchase, even at a public or
judicial auction, either in person or through the mediation of another:
xxxx
(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts,
and other officers and employees connected with the administration of justice, the
property and rights in litigation or levied upon an execution before the court
within whose jurisdiction or territory they exercise their respective functions; this
prohibition includes the act of acquiring by assignment and shall apply to lawyers,
with respect to the property and rights which may be the object of any litigation in
which they may take part by virtue of their profession.
A property is in litigation if there is a contest or litigation over it in court or when it is subject of

a judicial action. Records show that the judicial action over the subject lots was still in the
appellate proceedings stage when they were conveyed to Jesus and Rosita's counsel, Atty.
34
Robiso. Clearly then, since the property conveyed to Atty. Robiso by Jesus and Rosita was still
the object of litigation, the deeds of conveyance executed by the latter are deemed inexistent.
Under Article 1409 of the Code, contracts which are expressly prohibited or declared void by
law are considered inexistent and void from the beginning. This being so, Atty. Robiso could not
have transferred a valid title in favor of Pea over the lots awarded to Jesus and Rosita in Civil
Case No. 3683. Consequently, Pea has no legal standing to be substituted in the stead of or
joined with Jesus and Rosita as the first set of intervenors and to move for issuance of a writ of
execution in Civil Case No. 3683.
The rationale advanced for the prohibition in Article 1491(5) is that public policy disallows the
transactions in view of the fiduciary relationship involved, i.e., the relation of trust and
confidence and the peculiar control exercised by these persons. It is founded on public policy
because, by virtue of his office, an attorney may easily take advantage of the credulity and
ignorance of his client and unduly enrich himself at the expense of his client.
35
Melecio Domingo v. Spouses Genaro Molina and Elena B. Molina

G.R. No. 200274, April 20, 2016
(Sales; capacity of the contracting parties; sale of conjugal property)
Facts:
In 1951, spouses Anastacio and Flora Domingo bought a property in Tarlac consisting of one-
half undivided portion of an 18,164sqm parcel of land. During his lifetime, Anastacio borrowed
money from spouses Molina. In 1978 or ten years after Floras death, Anastacio sold his
undivided interest over the land to spouses Molina to cover his debt. The sale was registered and
the land was transferred to spouses Molina. Melecio, one of the children of Anastacio and Flora
Domingo, learned of the transfer and on 1999, Melecio filed a complaint for Annulment of Title
and Recovery of Ownership against spouses Molina claiming that Anastacio could not have
validly sold the interest over the subject property without Floras consent, as Flora was already
dead at the time of the sale. The spouses Molina asserted that Anastacio surrendered the title to
the subject property to answer for his debts and they have been in possession of the subject
property before the title was registered under their names and have religiously paid the
propertys real estate taxes. RTC dismissed the case and held that Anastacio could dispose of
conjugal property without Floras consent since the sale was necessary to answer for conjugal
liabilities. CA affirmed and held that Floras death is immaterial because Anastacio only sold his
rights, excluding Floras interest, over the lot to the spouses Molina. The CA explained that there
is no prohibition against the sale by the widower of real property formerly belonging to the
conjugal partnership of gains.
Issue:
W/N the sale of the conjugal property of Anastacio and Flora to the spouses Molina without the
consent of Flora is valid.
Held:
Yes. The sale is valid. Anastacio and Floras conjugal partnership was dissolved upon Floras
death. There is no dispute that Anastacio and Flora Domingo married before the Family Codes
effectivity on August 3, 1988 and their property relation is a conjugal partnership. Conjugal
partnership of gains established before and after the effectivity of the Family Code are governed
by the rules found in Chapter 4 (Conjugal Partnership of Gains) of Title IV (Property Relations
Between Husband and Wife) of the Family Code. This is clear from Article 105 of the Family
Code which states: x x x The provisions of this Chapter shall also apply to conjugal partnerships
of gains already established between spouses before the effectivity of this Code, without
prejudice to vested rights already acquired in accordance with the Civil Code or other laws, as
provided in Article 256. The conjugal partnership of Anastacio and Flora was dissolved when
Flora died in 1968, pursuant to Article 175 (1) of the Civil Code22 (now Article 126 (1) of the
Family Code). Article 130 of the Family Code requires the liquidation of the conjugal
partnership upon death of a spouse and prohibits any disposition or encumbrance of the conjugal
property prior to the conjugal partnership liquidation, to quote: Article 130. Upon the termination
of the marriage by death, the conjugal partnership property shall be liquidated in the same
proceeding for the settlement of the estate of the deceased. If no judicial settlement proceeding is
instituted, the surviving spouse shall liquidate the conjugal partnership property either judicially
or extrajudicially within one year from the death of the deceased spouse. If upon the lapse of the
six month period no liquidation is made, any disposition or encumbrance involving the conjugal
partnership property of the terminated marriage shall be void. x x x (emphases supplied) While
Article 130 of the Family Code provides that any disposition involving the conjugal property
without prior liquidation of the partnership shall be void, this rule does not apply since the
provisions of the Family Code shall be without prejudice to vested rights already acquired in
accordance with the Civil Code or other laws.
36
Equitable Savings Bank v. Rosalinda C. Palces

G.R. No. 214752, March 9, 21016
First Division, J. Perlas-Bernabe
(Sales; sale of personal property in installments; Article 1484)
Facts:
In 2005, Palces purchased a Hyundai Starex GRX Jumbo through a loan granted by Equitable
Savings Bank (Equitable). As security for the loan, Palces executed a promissory note (PN) with
chattel mortgage in favor of Equitable. The PN states that the payment shall be in 36 monthly
installments; that upon default in paying any installment renders the balance due and
demandable; and any default in payment gives Equitable the option to foreclose the mortgage or
file an ordinary civil action for collection or any other proceedings as may be allowed by law.
When Palces defaulted for two consecutive months, Equitable sent a demand letter compelling
Palces to pay the remaining balance of the loan, which Palces failed to do so. Thereafter,
Equitable filed a Complaint for Recovery of Possession with Replevin with Alternative Prayer
for Sum of Money and Damages against Palces. Palces claimed that even though she defaulted
payment, she called Equitable and spoke to their bank officer, who gave consent thereto, thus
Palces updated her payment by paying the monthly installments she missed. RTC ruled in favor
of Equitable holding Palces liable to pay the entire balance because she defaulted in payment.
However, since the writ of replevin over the subject vehicle had already been implemented, the
RTC merely confirmed petitioner's right to possess the same and ruled that it is no longer entitled
to its alternative prayer. CA affirmed with modification ordering Equitable to return the late
payments made by Palces. In this regard, the CA opined that by choosing to recover the subject
vehicle via a writ of replevin, petitioner already waived its right to recover any unpaid
installments, pursuant to Article 1484 of the Civil Code.
Issue:
W/N Equitable Savings Bank has the obligation to return to Palces the amount she paid
representing Palces late installment payments.
Held:
No. The bank has no obligation to return the amount representing the late installment payments.
Article 1484 of the Civil Code, which governs the sale of personal properties in installments,
states in full:
Article 1484. In a contract of sale of personal property the price of which is

payable in installments, the vendor may exercise any of the following remedies:
1. Exact fulfilment of the obligation, should the vendee fail to pay;

2. Cancel the sale, should the vendee's failure to pay cover two or more
installments;
3. Foreclose the chattel mortgage on the thing sold, if one has been
constituted, should the vendee's failure to pay cover two or more
installments. In this case, he shall have no further action against the
purchaser to recover any unpaid balance of the price. Any agreement to
the contrary shall be void.
In this case, there was no vendor-vendee relationship between respondent and petitioner. A
judicious perusal of the records would reveal that respondent never bought the subject vehicle
from petitioner but from a third party, and merely sought financing from petitioner for its full
purchase price. In order to document the loan transaction between petitioner and respondent, a
Promissory Note with Chattel Mortgage dated August 18, 2005 was executed wherein, inter alia,
respondent acknowledged her indebtedness to petitioner in the amount of Pl,196,100.00 and
37
placed the subject vehicle as a security for the loan. Indubitably, a loan contract with the
accessory chattel mortgage contract - and not a contract of sale of personal property in
installments - was entered into by the parties with respondent standing as the debtor-mortgagor
and petitioner as the creditor-mortgagee. Therefore, the conclusion of the CA that Article 1484
finds application in this case is misplaced, and thus, must be set aside.
Further, there is nothing in the Promissory Note with Chattel Mortgage that bars petitioner from
receiving any late partial payments from respondent. If at all, petitioner's acceptance of
respondent's late partial payments in the aggregate amount of P103,000.00 will only operate to
reduce her outstanding obligation to petitioner from P664,500.00 to P561,500.00. Such a
reduction in respondent's outstanding obligation should be accounted for when petitioner
conducts the impending foreclosure sale of the subject vehicle. Once such foreclosure sale has
been made, the proceeds thereof should be applied to the reduced amount of respondent's
outstanding obligation, and the excess of said proceeds, if any, should be returned to her.
38
Spouses Jaime and Matilde Poon v. Prime Savings Bank represented by the Philippine
Deposit Insurance Corporation as Statutory Liquidator
G.R. No. 183794, June 13, 2016
First Division, C.J. Sereno
(Lease; termination of the lease; loss of the thing)
Facts:
Spouses Poon owned a commercial building in Naga City, which they used for their bakery
business. In 2006, Matulde and PSBank executed a ten-year lease contract over the building to
be used as PSBanks branch office. The lease contract include a provision which states that:
24. Should the leased premises be closed, deserted, or vacated by the lesee, the
lessor shall have the right to terminate the lease without the necessity of serving a
court order and to immediately repossess the leased premises x x x. The lessor
shall thereupon have the right to enter into a new contract with another party. All
advanced rentals shall be forfeited in favor of the lessor.
Three years later BSP placed PSBank under receivership of PDIC because PSBanks liabilities
exceed its assets and it violated a cease and desist order amounting to fraud or dissipation of the
assets of the institution. Thereafter, PSBank vacated the premises and surrendered the same to
spouses Poon. Subsequnently, PDIC issued a demand letter to spouses Poon asking for the return
of the unused advanced rentals arguing that paragraph 24 no longer holds because the closure of
the bank constituted force majeure. Spouses Poon refused to pay claiming that they are entitled
to the rentals. RTC ruled in favor of PDIC. CA affirmed.
Issue:
W/N the closure of PSBank is a fortuitous event that rendered the lease agreement functus
officio and thus releasing PSBank from its contractual obligations with spouses Poon.
Held:
No. The closure of respondent's business was neither a fortuitous nor an unforeseen event that
rendered the lease agreement functus officio. The period during which the bank cannot do
business due to insolvency is not a fortuitous event, unless it is shown that the government's
action to place a bank under receivership or liquidation proceedings is tainted with arbitrariness,
or that the regulatory body has acted without jurisdiction.
As an alternative justification for its premature termination of the Contract, respondent lessee
invokes the doctrine of unforeseen event under Article 1267 of the Civil Code, which provides:
Art. 1267. When the service has become so difficult as to be manifestly beyond
the contemplation of the parties, the obligor may also be released therefrom, in
whole or in part.
Tagaytay Realty Co., Inc. v. Gacutan lays down the requisites for the application of Article 1267,
as follows:
1. The event or change in circumstance could not have been foreseen at the time of the
execution of the contract.
2. It makes the performance of the contract extremely difficult but not impossible.
3. It must not be due to the act of any of the parties.
4. The contract is for a future prestation.
39
The difficulty of performance should be such that the party seeking to be released from a
contractual obligation would be placed at a disadvantage by the unforeseen event. Mere
inconvenience, unexpected impediments, increased expenses, or even pecuniary inability to fulfil
an engagement, will not relieve the obligor from an undertaking that it has knowingly and freely
contracted.
The law speaks of service. This term should be understood as referring to the performance of
an obligation or a prestation. A prestation is the object of the contract; i.e., it is the conduct (to
give, to do or not to do) required of the parties. In a reciprocal contract such as the lease in this
case, one obligation of respondent as the lessee was to pay the agreed rents for the whole
contract period. It would be hard-pressed to complete the lease term since it was already out of
business only three and a half years into the 10-year contract period. Without a doubt, the second
and the fourth requisites mentioned above are present in this case. The first and the third
requisites, however, are lacking. It must be noted that the lease agreement was for 10 years. As
shown by the unrebutted testimony of Jaime Poon during trial, the parties had actually
considered the possibility of a deterioration or loss of respondent's business within that period.
Clearly, the closure of respondent's business was not an unforeseen event. As the lease was long-
term, it was not lost on the parties that such an eventuality might occur, as it was in fact covered
by the terms of their Contract. Besides, as We have previously discussed, the event was not
independent of respondent's will.
40
Magellan Aerospace Corporation v. Philippine Air Force

G.R. No. 216566, February 24, 2016
Second Division, J. Mendoza
(Agency; in general)
Facts:
Philippine Air Force (PAF) contracted Chervin Enterprises, Inc. (Chervin) for the overhaul of
two aircraft engines. Due to Chervins lack of technical capability to do the repair and overhaul,
Chervin commissioned Magellan Aerospace Corporation (MAC). MAC, in turn, outsourced the
overhaul service from another subcontractor, National Flight Services, Inc. (NSFI). Eventually,
the engines were repaired and overhauled and PAF paid Chervin for the services, withholding
P2M as retention fund.
MAC demanded from Chervin payment for the balance of the contract price but MAC was not
paid despite several demands. MAC demanded from PAF the release of retention fund but to no
avail. Thus, MAC filed a complaint for sum of money against Chervin and PAF. PAF claimed
that its contract with Chervin was one for repair and overhaul and not for agency and thus it
cannot be held liable as principal. RTC ruled in favor of PAF and CA affirmed.
Issue:
W/N the contract entered into by PAF and Chervin is a contract of agency.
Held:
No. There was no contract of agency between PAF and Chervin. The averment that Chervin
acted as PAFs mere agents in subsequently contracting MAC to perform the overhauling
services is not an ultimate fact. Nothing can be found in the complaint that can serve as a
premise of PAFs status as the principal in the contract between Chervin and MAC. No factual
circumstances were alleged that could plausibly convince the Court that PAF was a party to the
subsequent outsourcing of the overhauling services. Not even in the annexes can the Court find
any plausible basis for the assertion of MAC on PAFs status as a principal. What MAC entirely
did was to state a mere conclusion of law, if not, an inference based on matters not stated in the
pleading. To clarify, a mere allegation that PAF, as a principal of Chervin, can be held liable for
nonpayment of the amounts due, does not comply with the ultimate fact rule. Not being an
ultimate fact, the assumption of truth does not apply to the aforementioned allegation made by
MAC concerning PAF. Consequently, PAF cannot be held liable as a principal in the agreement
between Chervin and MAC.
41
Mactan-Cebu International Airport Authority v. Richard E. Unchuan

G.R. No. 182537, June 01, 2016
(Agency; formalities of contract of agency; special power of attorney; Articles 1874, 1878)
Facts:
In 2004 Unchuan filed a complaint for damages and Partial Declaration of nullity of the Deed of
Absolute Sale with Plea for Partition, Damages and Attorneys Fees against the MCIAA alleging
that he was the legal and rightful owner of two parcels of land in Lapu-Lapu City, which title to
said land was registered under the name of the heirs of Eugenio Godinez. Unchuan found that
Atanacio Godinez, attorney-in-fact of all the registered owners and their heirs, already sold the
land to Civil Aeronautics Administration (CAA), the predecessor of MCIAA. He claimed that
the sale covered by the Deed of Absolute Sale, dated April 3, 1958, was null and void because
the registered owners and their heirs did not authorize Atanacio to sell their undivided shares in
the subject lots in favor of CAA; that no actual consideration was paid to the said registered
owners or their heirs, despite promises that they would be paid; that the deed of absolute sale did
not bear the signature of the CAA representative; that there was no proof that the Secretary of the
Department of Public Works and Highways approved the sale; and that his predecessors-in-
interest merely tolerated the possession by CAA and, later, by MCIAA.
In its Answer, MCIAA averred that on April 3, 1958, Atanacio, acting as the representative of
the heirs of Eugenio Godinez, who were the registered owners, sold Lot No. 4810-A and Lot No.
4810-B to the Republic of the Philippines, represented by CAA. Thereafter, CAA took
possession of the said property upon payment of the purchase price. To corroborate the said
transaction, on September 17, 1969, Atanacio, along with other former registered co-owners,
signed a deed of partition attesting to the fact of sale of the two lots in favor of the government
and admitted its absolute right over the same. Since then, the said lots had been in the possession
of the Republic in the concept of an owner.
RTC ruled in favor of Unchuan holding that Atanacio was not legally authorized to act as the
attorney-in-fact of his brothers and sisters and to transact on their behalf because he was not
clothed with a special power of attorney granting him authority to sell the disputed lots. This
lack of authority of Atanacio Godinez, therefore, has an effect of making the contract of sale
between the parties' predecessors-in-interest as void except perhaps for the share of Atanacio
Godinez which he could very well alienate. Moreover, the documentation of the sale was never
transmitted to CAA's Manila Office; hence, the heirs did not receive any payment for the sale
transaction. CA affirmed.
Issue:
W/N the sale is void because Atanacio has no authority to sell the subject lands.
Held:
Yes. The sale transaction executed between Atanacio, acting as an agent of his fellow registered
owners, and the CAA was indeed void insofar as the other registered owners were concerned.
They were represented without a written authority from them clearly in violation of the
requirement under Articles 1874 and 1878 of the Civil Code, which provide:
Art. 1874. When a sale of a piece of land or any interest therein is through an
agent, the authority of the latter shall be in writing; otherwise, the sale shall be
void.
Art. 1878. Special powers of attorney are necessary in the following cases:
42
xxx
(5) To enter into any contract by which the ownership of an immovable is

transmitted or acquired either gratuitously or for a valuable consideration;
xxx
The significance of requiring the authority of an agent to be put into writing was amplified in
Dizon v. Court of Appeals:
When the sale of a piece of land or any interest thereon is through an agent, the authority of the
latter shall be in writing; otherwise, the sale shall be void. Thus the authority of an agent to
execute a contract for the sale of real estate must be conferred in writing and must give him
specific authority, either to conduct the general business of the principal or to execute a binding
contract containing terms and conditions which are in the contract he did execute. A special
power of attorney is necessary to enter into any contract by which the ownership of an
immovable is transmitted or acquired either gratuitously or for a valuable consideration. The
express mandate required by law to enable an appointee of an agency (couched) in general terms
to sell must be one that expressly mentions a sale or that includes a sale as a necessary ingredient
of the act mentioned. For the principal to confer the right upon an agent to sell real estate, a
power of attorney must so express the powers of the agent in clear and unmistakable language.
When there is any reasonable doubt that the language so used conveys such power, no such
construction shall be given the document.
Without a special power of attorney specifying his authority to dispose of an immovable,

Atanacio could not be legally considered as the representative of the other registered co-owners
of the properties in question. Atanacio's act of conveying Lot No. 4810-A and Lot No. 4810-B
cannot be a valid source of obligation to bind all the other registered co-owners and their heirs
because he was not clothed with any authority to enter into a contract with CAA. The other heirs
could not have given their consent as required under Article 147550 of the New Civil Code
because there was no meeting of the minds among the other registered co-owners who gave no
written authority to Atanacio to transact on their behalf. Therefore, no contract was perfected
insofar as the portions or shares of the other registered co-owners or their heirs were concerned.
43
Bank of the Philippine Islands And FGU Insurance Corporation (Presently Known As
BPI/MS Insurance Corporation) v. Yolanda Laingo
G.R. No. 205206, March 16, 2016
Second Division, J. Carpio
(Agency; obligations of the agent; Articles 1884, 1887)
Facts:
In July 1999, Rheozel, the son of respondent Laingo, opened an insurance account with BPI
Caveria, Davao City, with Laingo as his named beneficiary. The insurance account is a savings
account where depositors are automatically covered by an insurance policy against disability or
death issued by petitioner FGU Insurance Corporation (FGU). In September 2000, Rhoezel died
due to a vehicular accident. This was headlined in the Daily Mirror newspaper the following day.
On the next day, Laingo instructed Alice, the familys personal secretary, to go to BPI and
inquire about the savings account of Rhoezel as it would be used for burial and funeral expenses.
Alice was allowed to withdraw P995,000.00. About two years thereafter, Rheozels sister
accidentally found the insurance certificate in Rheozels room and gave it to her mother Laingo.
Laingo requested BPI to process the claim but FGU, in a letter, denied the claim stating that
Laingo should have filed the claim 3 months after the death of the insured, as stated in the
agreement. Laingo filed a complaint for specific performance with damages against BPI and
FGU.
RTC ruled in favor of the respondents stating that the prescriptive period of 90 days shall
commence from the time of death of the insured and not from the knowledge of the beneficiary.
Since the insurance claim was filed more than 90 days from the death of the insured, the case
must be dismissed. CA reversed RTC and ruled that Laingo could not be expected to do an
obligation which she did not know existed. The appellate court added that Laingo was not a party
to the insurance contract entered into between Rheozel and petitioners. Thus, she could not be
bound by the 90-day stipulation. CA ordered BPI and FGU to pay Laigo the insurance proceeds
with interest and damages.
Issue:
W/N BPI and FGU are liable to pay Laingo the insurance proceeds as beneficiary even if the
claim was filed out of time.
Held:
Yes. As the main proponent of the 2-in-1 deposit account, BPI tied up with its affiliate, FGU
Insurance, as its partner. Any customer interested to open a deposit account under this 2-in-1
product, after submitting all the required documents to BPI and obtaining BPI's approval, will
automatically be given insurance coverage. Thus, BPI acted as agent of FGU Insurance with
respect to the insurance feature of its own marketed product.
Under the law, an agent is one who binds himself to render some service or to do something in
representation of another. Agency may even be implied from the words and conduct of the
parties and the circumstances of the particular case. For an agency to arise, it is not necessary
that the principal personally encounter the third person with whom the agent interacts. The law in
fact contemplates impersonal dealings where the principal need not personally know or meet the
third person with whom the agent transacts: precisely, the purpose of agency is to extend the
personality of the principal through the facility of the agent. In this case, since the Platinum 2-in-
1 Savings and Insurance account was BPI's commercial product, offering the insurance coverage
free for every deposit account opened, Rheozel directly communicated with BPI, the agent of
FGU Insurance.
44
BPI, as agent of FGU Insurance, had the primary responsibility to ensure that the 2-in-1 account
be reasonably carried out with full disclosure to the parties concerned, particularly the
beneficiaries. Thus, it was incumbent upon BPI to give proper notice of the existence of the
insurance coverage and the stipulation in the insurance contract for filing a claim to Laingo, as
Rheozel's beneficiary, upon the latter's death. Articles 1884 and 1887 of the Civil Code state:
Art. 1884. The agent is bound by his acceptance to carry out the agency and is
liable for the damages which, through his non-performance, the principal may
suffer. He must also finish the business already begun on the death of the
principal, should delay entail any danger.
Art. 1887. In the execution of the agency, the agent shall act in accordance with
the instructions of the principal. In default, thereof, he shall do all that a good
father of a family would do, as required by the nature of the business.
The provision is clear that an agent is bound to carry out the agency. The relationship existing
between principal and agent is a fiduciary one, demanding conditions of trust and confidence. It
is the duty of the agent to act in good faith for the advancement of the interests of the principal.
In this case, BPI had the obligation to carry out the agency by informing the beneficiary, who
appeared before BPI to withdraw funds of the insured who was BPI's depositor, not only of the
existence of the insurance contract but also the accompanying terms and conditions of the
insurance policy in order for the beneficiary to be able to properly and timely claim the benefit.
Upon Rheozel's death, which was properly communicated to BPI by his mother Laingo, BPI, in
turn, should have fulfilled its duty, as agent of FGU Insurance, of advising Laingo that there was
an added benefit of insurance coverage in Rheozel's savings account. This notification is how a
good father of a family should have acted within the scope of its business dealings with its
clients.
Since BPI, as agent of FGU Insurance, fell short in notifying Laingo of the existence of the
insurance policy, Laingo had no means to ascertain that she was entitled to the insurance claim.
It would be unfair for Laingo to shoulder the burden of loss when BPI was remiss in its duty to
properly notify her that she was a beneficiary. Thus, as correctly decided by the appellate court,
BPI and FGU Insurance shall bear the loss and must compensate Laingo for the actual damages
suffered by her family plus attorney's fees. Likewise, FGU Insurance has the obligation to pay
the insurance proceeds of Rheozel's personal accident insurance coverage to Laingo, as Rheozel's
named beneficiary.
45
Dra. Mercedes Oliver v. Philippine Saving Bank and Lilia Castro

G.R. No. 214567, April 04, 2016
(Agency; obligations of the agent; Article 1881)
Facts:
Oliver was a depositor of PSBank and Castro was the Asst. VP and Acting Branch Manager of
PSBank San Pedro, Laguna. In 1997, Oliver made an initial deposit of P12M in her account and
Castro convinced her to loan out her deposit as interim or bridge financing for the approved
loans of bank borrowers who were waiting for the actual release of their loan proceeds and with
such Oliver will earn 4% per loan transaction. Due to the frequency of their transactions, Oliver
entrusted her passbook to Castro. After sometime, Castro convinced Oliver to avail of an
additional P10M credit line. The credit line was secured by a REM on Olivers house and lot in
Ayala, Alabang. Oliver instructed Castro to pay P2M monthly to PSBank starting September 3,
1998 so that her credit line will be fully paid after 5 months. In the same month, Castro stopped
rendering an accounting for Oliver. Oliver demanded the return of her passbook and she noticed
several erasures and superimpositions therein. She became very suspicious so she requested a
copy of her transaction history register from PSBank. Upon receiving her copy, Oliver was
surprised to discover that P.4.5M was entered into her account on December 1998 and a total of
P7M was withdrawn on the same day. She also discovered several other loan transactions she
never applied for in connection with the P10M credit line. She also discovered several
inconsistencies between her passbook record and the transaction history register. Afterwards, she
received collection letters from PSBank but she refused to pay. Subsequently, she received a
notice of sale involving her property in Ayala, Alabang. As a result, Oliver filed a complaint
against PSBank and Castro.
RTC ruled in favor of PSBank and Castro but reversed itself upon a motion for reconsideration
filed by Oliver. According to the RTC, Oliver's assertion that the withdrawal was made without
her consent prevailed in the absence of any proof to the contrary. CA reversed. The appellate
court found no compelling evidence to prove that fraud attended the processing and release of
the P4.5 million loan as well as the withdrawal of P7 million from Oliver's account. CA also
found that PSBank exercised extraordinary diligence in handling Oliver's account, thus, the
awards of damages were deleted.
Issue:
W/N Castro is the agent of Oliver and therefore Castro and PSBank should be liable for the
transactions regarding the bank account of Oliver
Held:
Yes. There was an implied agency between Oliver and Castro; the loans were properly acquired.
A contract of agency may be inferred from all the dealings between Oliver and Castro. Agency
can be express or implied from the acts of the principal, from his silence or lack of action, or his
failure to repudiate the agency knowing that another, person is acting on his behalf without
authority. In this case, clearly, an agency was formed because Castro bound herself to render
some service in representation or on behalf of Oliver, in the furtherance of their business pursuit.
For months, the agency between Oliver and Castro benefited both parties. Oliver, through
Castro's representations, was able to obtain loans, relend them to borrowers, and earn interests;
while Castro acquired commissions from the transactions. Oliver even gave Castro her passbook
to facilitate the transactions.
Accordingly, the laws on agency apply to their relationship. Article 1881 of the New Civil Code
provides that the agent must act within the scope of his authority. He may do such acts as may be
conducive to the accomplishment of the purpose of the agency. Thus, as long as the agent acts
46
within the scope of the authority given by his principal, the actions of the former shall bind the
latter. Although it was proven that Oliver authorized the loans, there was nothing in the records
which proved that she also allowed the withdrawal of P7 million from her bank account. Oliver
vehemently denied that she gave any authority whatsoever to either Castro or PSBank to
withdraw the said amount. Castro's lack of authority to withdraw the P7 million on behalf of
Oliver became more apparent when she altered the passbook to hide such transaction. The Court
is convinced that Castro went beyond the scope of her authority in withdrawing the P7 million
from Oliver's bank account. Her flimsy excuse that the said amount was transferred to the
account of a certain Lim deserves scant consideration. Hence, Castro must be held liable for
prejudicing Oliver.
On the other hand, PSBank failed to exercise the highest degree of diligence required of banking
institutions. Aside from Castro, PSBank must also be held liable because it failed to exercise
utmost diligence in the improper withdrawal of the P7 million from Oliver's bank account. In the
case of banks, the degree of diligence required is more than that of a good father of a family.
Considering the fiduciary nature of their relationship with their depositors, banks are duty bound
to treat the accounts of their clients with the highest degree of care. The point is that as a
business affected with public interest and because of the nature of its functions, the bank is under
obligation to treat the accounts of its depositors with meticulous care, always having in mind the
fiduciary nature of their relationship.
47
Michael C. Guy v. Atty. Glenn C. Gacott

G.R. No. 206147, January 13, 2016
(Partnership; liability of partners; solidary liability; Articles 1816, 1821-1824)
Facts:
Gacott purchased two brand new transreceivers form Quantech Systems Corporation (QSC) in
Manila through its employee, Medestomas, but due to major defects, Gacott personally returned
the transreceivers to QSC and requested for replacement. Medestomas received the returned
transreceivers and promised to send replacements within two weeks but time passed and Gacott
did not receive any replacements so he demanded for it but QSC said that there were no available
units and it could also not refund the purchase price. Gacott filed a complaint for damages. RTC
ruled in favor of Gacott. During execution of judgment, Gacott learned that QSC was not a
corporation but a general partnership, with Guy as the appointed general manager. To execute
judgment, the sheriff attached one of the motor vehicles of Guy and notice was served to Guy
thorough his housemaid at his residence. Guy filed motion to lift attachment arguing that he was
not a judgment debtor. RTC denied the motion stating that as general partner, he may be held
jointly and severally liable with QSC and Medestomas. CA affirmed and opined that the law did
not require a partner to be actually involved in a suit in order for him to be made liable. He
remained solidarily liable whether he participated or not, whether he ratified it or not, or
whether he had knowledge of the act or omission.
Issue:
Whether or not Guy is solidarily liable with the partnership for damages arising from the breach
of the contract of sale with Gacott.
Held:
No. Guy is not solidarily liable with the partnership. Although a partnership is based on delectus
personae or mutual agency, whereby any partner can generally represent the partnership in its
business affairs, it is non sequitur that a suit against the partnership is necessarily a suit
impleading each and every partner. It must be remembered that a partnership is a juridical entity
that has a distinct and separate personality from the persons composing it.
Further, Article 1821 of the Civil Code does not state that there is no need to implead a partner in
order to be bound by the partnership liability. A careful reading of the provision shows that
notice to any partner, under certain circumstances, operates as notice to or knowledge to the
partnership only. Evidently, it does not provide for the reverse situation, or that notice to the
partnership is notice to the partners. Unless there is an unequivocal law which states that a
partner is automatically charged in a complaint against the partnership, the constitutional right to
due process takes precedence and a partner must first be impleaded before he can be considered
as a judgment debtor.
Moreover, even granting that Guy was properly impleaded in the complaint, the execution of
judgment would be improper. Article 1816 of the Civil Code governs the liability of the partners
to third persons. This provision clearly states that, first, the partners obligation with respect to
the partnership liabilities is subsidiary in nature. It provides that the partners shall only be liable
with their property after all the partnership assets have been exhausted. To say that ones liability
is subsidiary means that it merely becomes secondary and only arises if the one primarily liable
fails to sufficiently satisfy the obligation. Resort to the properties of a partner may be made only
after efforts in exhausting partnership assets have failed or that such partnership assets are
insufficient to cover the entire obligation.
48
Article 1816 provides that the partners obligation to third persons with respect to the partnership
liability is pro rata or joint. Liability is joint when a debtor is liable only for the payment of only
a proportionate part of the debt. In contrast, a solidary liability makes a debtor liable for the
payment of the entire debt. In the same vein, Article 1207 does not presume solidary liability
unless: 1) the obligation expressly so states; or 2) the law or nature requires solidarity. With
regard to partnerships, ordinarily, the liability of the partners is not solidary. The joint liability of
the partners is a defense that can be raised by a partner impleaded in a complaint against the
partnership.
In other words, only in exceptional circumstances shall the partners liability be solidary in
nature. Articles 1822, 1823 and 1824 of the Civil Code provide for these exceptional conditions,
to wit:
Article 1822. Where, by any wrongful act or omission of any partner acting in the
ordinary course of the business of the partnership or with the authority of his co-
partners, loss or injury is caused to any person, not being a partner in the
partnership, or any penalty is incurred, the partnership is liable therefor to the
same extent as the partner so acting or omitting to act.
Article 1823. The partnership is bound to make good the loss:
1. Where one partner acting within the scope of his apparent authority
receives money or property of a third person and misapplies it; and
2. Where the partnership in the course of its business receives money or

property of a third person and the money or property so received is
misapplied by any partner while it is in the custody of the partnership.
Article 1824. All partners are liable solidarily with the partnership for everything
chargeable to the partnership under Articles 1822 and 1823.
In the case at bench, it was not shown that Guy or the other partners did a wrongful act or
misapplied the money or property he or the partnership received from Gacott. A third person
who transacted with said partnership can hold the partners solidarily liable for the whole
obligation if the case of the third person falls under Articles 1822 or 1823. Gacotts claim
through the latter's employee, Medestomas. It was for a breach of warranty in a contractual
obligation entered into in the name and for the account of QSC, not due to the acts of any of the
partners. For said reason, it is the general rule under Article 1816 that governs the joint liability
of such breach, and not the exceptions under Articles 1822 to 1824. Thus, it was improper to
hold Guy solidarily liable for the obligation of the partnership.
49
Jose Norberto Ang v. The Estate of Sy So

G.R. No. 182252, August 3, 2016
(Trusts; kinds of trusts; implied trust; Article 1448)
Facts:
In 1930, Sy So was married to Jose Ang. The couple was childless. In 1941 they adopted Jose
Norberto with no formal adoption papers. They also adopted three other wards with no formal
adoption papers. In 1943, Jose Ang died. Later, Sy So acquired a property in Caloocan and
named it after Norberto. She acquired another property and named it again after Jose Norberto. A
six-door apartment was built on the property, which later on became an eight-door apartment.
For 30 years, the family lived there. In 1989, however, having registered the property to his
name, Jose Norberto filed an ejectment suit against Sy So for non-payment of rentals despite
demand.
In 1993, Sy So filed with RTC a case for Transfer of Trusteeship from the Defendant Jose
Norberto Ang to the New Trustee, Tony Ang, with Damages citing Jose Norberto's gross
ingratitude, disrespectfulness, dishonesty and breach of trust, respondent Sy So argued that she
had bought the two parcels of land and constructed the apartment doors thereon at her own
expense. Thus, she alleged that there was an implied trust over the properties in question.
In his Answer, Jose Norberto countered that respondent Sy So was a plain housewife; that the
two subject parcels of land were acquired through the money given to him by his foster father,
Jose Ang; and that the apartments were built using funds derived from the sale of the latter's
other properties. Jose Norberto further alleged that when he came of age, he took possession of
the properties and allowed respondent Sy So to stay thereon without paying rent. However, he
shouldered the real estate taxes on the land. Jose Norberto filed a second ejectment case in 1996.
RTC dismissed Sy Sos complaint holding that there was no implied trust because, under Art.
1448 of the New Civil Code, there is an implied trust when property is sold, and the legal estate
is granted to one party but the price is paid by another for the purpose of having the beneficial
interest of the property. In this case, the trial court reasoned that respondent Sy So did not
intend to have the beneficial interest of the properties, but to make her wards the beneficiaries
thereof. Moreover, RTC ruled that when Sy So gave the subject properties to Jose Norberto -
who was her child, though not legally adopted - no implied trust was created pursuant to law. CA
upheld the applicability of Article 1448 of the Civil Code and the existence of an implied trust.
Issue:
W/N there was an implied trust thus making the substitution valid.
Held:
No, there was no implied trust. Sy So's Chinese citizenship is undisputedly shown by the records,
and even supported by documentary evidence presented by the representative of respondent Sy
So herself. Under the Constitution then in force, aliens may not acquire residential lands. These
provisions have been substantially carried over to the present Constitution, and jurisprudence
confirms that aliens are disqualified from acquiring lands of the public domain. We have
consistently ruled thus in line with constitutional intent to preserve and conserve the national
patrimony. Our Constitution clearly reserves for Filipino citizens or corporations at least sixty
percent of the capital of which is owned by Filipinos the right to acquire lands of the public
domain. The prohibition against aliens owning lands in the Philippines is subject only to limited
constitutional exceptions, and not even an implied trust can be permitted on equity
considerations.
50
Much as We sympathize with the plight of a mother who adopted an infant son, only to have her
ungrateful ward eject her from her property during her twilight years, We cannot grant her
prayer. Applying the above rules to the present case, We find that she acquired the subject
parcels of land in violation of the constitutional prohibition against aliens owning real property in
the Philippines. Axiomatically, the properties in question cannot *be legally reconveyed to one
who had no right to own them in the first place. This being the case, We no longer find it
necessary to pass upon the question of respondent Sy So's substitution in these proceedings.
51
Spouses Roberto and Adelaida Pen v. Spouses Santos and Linda Julian
G.R. No. 160408, January 11, 2016
(Credit transactions; pledge; mortgage; pactum commissorium; Article 2088)
Facts:
In 1986, spouses Julian obtained several loans from Adelaida Pen. Evidenced by two promissory
notes and secured by a REM over a property registered under the name of Santos. When the
loans become due and demandable, spouses Julian failed to pay despite several demands, forcing
Adelaida to institute foreclosure proceedings. Before she could file the foreclosure proceedings,
Linda offered the mortgaged property as payment in kind. The parties agreed to have the
property valued at P70,000.00. Thereafter, spouses Julian executed the Deed of Sale and after
spouses Pens payment of taxes, title was transferred to their name. In 1989 and in 1990, Linda
offered to repurchase the property but failed to give payment in the agreed dates. Linda offered
to pay P100,000.00 in cash as sign of good faith but spouses Pen refused to accept but instead, it
was deducted to the indebtedness of spouses Julian so that as of October 1997, their unpaid
balance amounted to P319,065.00. However, instead of paying the balance, spouses Julian
instituted an adverse claim and lis pendens and both were annotated at the back of the title.
Spouses Julians version of the story is different. According to them, the deed of absolute sale
had no consideration, undated, unfilled, and unnotarized. They also claimed that in December
1992 they offered to pay P150,000.00 but Adelaida refused and demanded P250,000.00. Linda
desisted and instead checked the property with the Register of Deeds. She discovered that the
land was already registered in the name of spouses Pen, which prompted Linda Julian to file an
adverse claim against spouses Pen.
RTC ruled in favor of spouses Julian concluding that the deed of sale is not valid for lack of
consideration, but the PNs and the REM is valid, holding the spouses Julian still liable to pay
their outstanding obligations with interest. CA affirmed with modifications ruling that the deed
of sale is void, not for lack of consideration, but because it was executed at the same time as the
REM, which makes the sale a prohibited pactum commissorium, in light of the fact that the deed
of sale was blank as to consideration and date.
Issue:
W/N the deed of sale entered into by spouses Pen and spouse Julian is a pactum commissorium.
Held:
Yes. Article 2088 of the Civil Code prohibits the creditor from appropriating the things given by
way of pledge or mortgage, or from disposing of them any stipulation to the contrary is null and
void.
The elements for pactum commissorium to exist are as follows, to wit: (a) that there should be a
pledge or mortgage wherein property is pledged or mortgaged by way of security for the
payment of the principal obligation and (b) that there should be a stipulation for an automatic
appropriation by the creditor of the thing pledged or mortgaged in the event of nonpayment of
the principal obligation within the stipulated period. The first element was present considering
that the property of the respondents was mortgaged by Linda in favor of Adelaida as security for
the formers indebtedness. As to the second, the authorization for Adelaida to appropriate the
property subject of the mortgage upon Lindas default was implied from Lindas having signed
the blank deed of sale simultaneously with her signing of the real estate mortgage.
52
The haste with which the transfer of property was made upon the default by Linda on her
obligation, and the eventual transfer of the property in a manner not in the form of a valid dacion
en pago ultimately confirmed the nature of the transaction as a pactum commissorium.
It is notable that in reaching its conclusion that Lindas deed of sale had been executed
simultaneously with the real estate mortgage, the CA first compared the unfilled deed of sale
presented by Linda with the notarized deed of sale adduced by Adelaida. The CA justly deduced
that the completion and execution of the deed of sale had been conditioned on the nonpayment of
the debt by Linda, and reasonably pronounced that such circumstances rendered the transaction
pactum commissorium.
53
Rosalina Carodan v. China Banking Corporation

G.R. No. 210542, February 24, 2016
(Credit Transactions; mortgage; accommodation mortgage; suretyship; guarantyship; Article

2047)
Facts:
Barbara, Rosalina, Rebecca (petitioner) and Madeline obtained a loan from Chinabank covered
by a promissory note to which they promised to pay jointly and severally the amount of P2.8M.
As security for payment, Barbara, Rebecca and Rosalina executed a REM over a property
registered in the name of Rosalina. Moreover, Barbara and Rebecca, as principals, also executed
a surety agreement in favor of Chinabank as creditor, with Rosalina and Madeline as sureties.
Barbara and Rebecca failed to pay their obligations, which prompted the bank to institute extra-
judicial foreclosure proceedings on the mortgaged property, and after the property was sold, the
proceedings from the sale was not enough to cover the debt. Thus, chinabank filed a complaint in
Court to collect the deficiency. Barbara and Rebecca claimed that Rosalina and Madeline never
complied with their obligation to pay their share in the loan and filed a crossclaim against
Rosalina and Madeline. Chinabank filed its reply and clarified that it was suing Barbara and
Rebecca as debtors under the promissory note and as principals in the surety agreement, as well
as Rosalina and Madeline as sureties in the same agreement.
RTC ruled in favor of Chinabank holding petitioner Rosalina, Rebecca, Barbara to be jointly and
severally liable to Chinabank for the deficiency between the outstanding loan and the proceeds of
the foreclosure sale. The trial court held that the creditor had the right to proceed against any one
of the solidary debtors, or some or all of them simultaneously; and that a creditor's right to
proceed against the surety exists independently of the creditor's right to proceed against the
principal. CA affirmed.
Issue:
W/N Rosalina is liable jointly and severally with Barbara and Rebecca for the payment of
Chinabanks claims.
Held:
Yes. Rosalina is liable jointly and severally with Barbara and Rebecca as an accommodation
mortgagor and as surety. In Belo v. PNB, we had the occasion to declare:
An accommodation mortgage is not necessarily void simply because the

accommodation mortgagor did not benefit from the same. The validity of an
accommodation mo1igage is allowed under Article 2085 of the New Civil Code
which provides that third persons who are not parties to the principal obligation
may secure the latter by pledging or mortgaging their own property. An
accommodation mortgagor, ordinarily, is not himself a recipient of the loan,
otherwise that would be contrary to his designation as such.
Apart from being an accommodation mortgagor, Rosalina is also a surety, defined under Article
2047 of the Civil Code in this wise:
Art. 2047. By guaranty a person, called a guarantor, binds himself to the creditor
to fulfill the obligation of the principal debtor in case the latter should fail to do
so.
54
If a person binds himself solidarily with the principal debtor, the provisions of
Section 4, Chapter 3, Title I of this Book shall be observed. In such case the
contract is called a suretyship.
A contract of suretyship (second paragraph of Article 2047) has been juxtaposed against a
contract of guaranty (first paragraph of Article 2047) as follows:
A surety is an insurer of the debt, whereas a guarantor is an insurer of the

solvency of the debtor. A suretyship is an undertaking that the debt shall be paid;
a guaranty, an undertaking that the debtor shall pay. Stated differently, a surety
promises to pay the principal's debt if the principal will not pay, while a guarantor
agrees that the creditor, after proceeding against the principal, may proceed
against the guarantor if the principal is unable to pay. A surety binds himself to
perform if the principal does not, without regard to his ability to do so. A
guarantor, on the other hand, does not contract that the principal will pay, but
simply that he is able to do so. In other words, a surety undertakes directly for the
payment and is so responsible at once if the principal debtor makes default, while
a guarantor contracts to pay if, by the use of due diligence, the debt cannot be
made out of the principal debtor.
Further discussion on the same legal concept proceeded thusly:
A contract of surety is an accessory promise by which a person binds himself for

another already bound, and agrees with the creditor to satisfy the obligation if the
debtor does not. A contract of guaranty, on the other hand, is a collateral
undertaking to pay the debt of another in case the latter does not pay the debt.
Simply put, a surety is distinguished from a guaranty in that a guarantor is the

insurer of the solvency of the debtor and thus binds himself to pay if the principal
is unable to pay while a surety is the insurer of the debt, and he obligates himself
to pay if the principal does not pay.
When Rosalina affixed her signature to the Real Estate Mortgage as mortgagor and to the Surety
Agreement as surety which covered the loan transaction represented by the Promissory Note, she
thereby bound herself to be liable to China Bank in case the principal debtors, Barbara and
Rebecca, failed to pay. She consequently became liable to respondent bank for the payment of
the debt of Barbara and Rebecca when the latter two actually did not pay.
55
Greenstar Express, Inc. and Fruto L. Sayson, Jr. v. Universal Robina Corporation and
Nissin Universal Robina Corporation
G.R. No. 205090, October 17, 2016
(Torts; liability of the employer for the damages caused by their employees; doctrine of last
clear chance; Article 2180)
Facts:
Greenstar is a domestic corporation engaged in the business of public transportation and Sayson
is one of its drivers. URC and NURC are domestic corporations engaged in the food business,
NURC being a subsidiary of URC. On February 25, 2003 which is a national holiday, a
Greenstar bus driven by Sayson collided head-on with a URC van driven by Bicomong. The
incident happened along Maharlika Highway, Alaminos, Laguna. Bicomong died on the spot
while both the vehicles sustained considerable damage. Greenstar filed a complaint against
NURC to recover damages alleging that there was negligence on the part of Bicomong. NURC
claimed that there was no negligence on their part and on the part of Bicomong as driver.
RTC dismissed the complaint for damages. After evaluation of the facts, it ruled that Greenstar
has no cause of action and cannot recover from URC, even assuming that the direct and
proximate cause of the accident was the negligence of the defendant's employee Renato
Bicomong. Pursuant to Article 2184 of the New Civil Code, the owner of a motor vehicle is
solidarily liable with his driver if at the time of the mishap, the owner was in the vehicle and by
the use of due diligence could have presented (sic) the misfortune; if the owner is not in the
motor vehicle, the provision of Article 2180 is applicable. The defendants being juridical
persons, the first paragraph of Article 2184 is obviously not applicable. Under Article 2180,
employers shall be liable for the damages caused by their employees and household helpers
acting within the scope of their assigned tasks, even though the former are not engaged in any
business or industry. In other words, for the employer to be liable for the damages caused by his
employee, the latter must have caused the damage in the course of doing his assigned tasks or in
the-performance of his duties.
Here, Bicomong was not in the performance of his duty when the accident happened. It was a
holiday and URC has no business transaction whatsoever in the area and the van was merely
borrowed by Bicomong for personal use. The accident having occurred outside Bicomong's
assigned tasks, defendant employers cannot be held liable to the plaintiffs, even assuming that it
is the fault of defendants' employee that was the direct and proximate cause of their damages.
CA affirmed the decision of the RTC and held that the present case involves an action for
damages based on quasi-delict is governed by Articles 2176 and 2180 of the New Civil Code.
Issue:
W/N NURC and URC are liable to Greenstar for the damages they sustained during the incident
Held:
No. NURC and URC are not liable to pay damages against Greenstar. The resolution of this case
must consider two (2) rules. First, Article 2180's specification that '[e]mployers shall be liable for
the damages caused by their employees ... acting within the scope of their assigned tasks [.]'
Second, the operation of the registered-owner rule, that registered owners are liable for death or
injuries caused by the operation of their Vehicles.
These rules appear to be in conflict when it comes to cases in which the employer is also the
registered owner of a vehicle. Article 2180 requires proof of two things: first, an employment
relationship between the driver and the owner; and second, that the driver acted within the scope
of his or her assigned tasks. On the other hand, applying the registered-owner rule only requires
the plaintiff to prove that the defendant-employer is the registered owner of the vehicle. The
56
appropriate approach is that in cases where both the registered-owner rule and Article 2180
apply, the plaintiff must first establish that the employer is the registered owner of the vehicle in
question. Once the plaintiff successfully proves ownership, there arises a disputable presumption
that the requirements of Article 2180 have been proven. As a consequence, the burden of proof
shifts to the defendant to show that no liability under Article 2180 has arisen.
Thus, when by evidence the ownership of the van and Bicomong's employment were proved, the
presumption of negligence on respondents' part attached, as the registered owner of the van and
as Bicomong's employer. The burden of proof then shifted to respondents to show that no
liability under Article 2180 arose. This may be done by proof of any of the following:
1. That they had no employment relationship with Bicomong; or

2. That Bicomong acted outside the scope of his assigned tasks; or
3. That they exercised the diligence of a good father of a family in the selection and
supervision of Bicomong.
Respondents succeeded in overcoming the presumption of negligence, having shown that when
the collision took place, Bicomong was not in the performance of his work; that he was in
possession of a service vehicle that did not belong to his employer NURC, but to URC, and
which vehicle was not officially assigned to him, but to another employee; that his use of the
URC van was unauthorized - even if he had used the same vehicle in furtherance of a personal
undertaking in the past, this does not amount to implied permission; that the accident occurred on
a holiday and while Bicomong was on his way home to his family in Quezon province; and that
Bicomong had no official business whatsoever in his hometown in Quezon, or in Laguna where
the collision occurred, his area of operations being limited to the Cavite area.
On the other hand, the evidence suggests that the collision could have been avoided if Sayson
exercised care and prudence, given the circumstances and information that he had immediately
prior to the accident. The collision was certainly foreseen and avoidable but Sayson took no
measures to avoid it. To add insult to injury, Sayson hastily fled the scene of the collision instead
of rendering assistance to the victims. The doctrine of last clear chance provides that where both
parties are negligent but the negligent act of one is appreciably later in point of time than that of
the other, or where it is impossible to determine whose fault or negligence brought about the
occurrence of the incident, the one who had the last clear opportunity to avoid the impending
harm but failed to do so, is chargeable with the consequences arising therefrom. Stated
differently, the rule is that the antecedent negligence of a person does not preclude recovery of
damages caused by the supervening negligence of the latter, who had the last fair chance to
prevent the impending harm by the exercise of due diligence.
57
Sulpicio Lines, Inc. v. Napoleon Sesante

G.R.No. 172682, July 27, 2016
(Damages; moral; temperate)
Facts:
In 1998, MV Princess of the Orient, a passenger vessel owned and operated by Sulpicio Lines,
sank near Fortune Island in Batangas. 150 out of 388 recorded passengers were lost. Napoleon
Sesante, member of the PNP and a lawyer, was one of the survivors. He sued Sulpicio Lines for
breach of contract and damages. The sinking of the ship was allegedly due to the fact the the
vessel still sailed despite the stormy weather. Because of this, the vessel was hit by strong winds
and big waves, putting the passengers in danger. He claimed that due to the experience he had
undergone, he had suffered tremendous hunger, thirst, pain, fear, shock, serious anxiety and
mental anguish. He had sustained injuries, and had lost money, jewelry, important documents,
police uniforms and the .45 caliber pistol issued to him by the PNP; and that because it had
committed bad faith in allowing the vessel to sail despite the storm signal, the petitioner should
pay him actual and moral damages of P500,000.00 and Pl,000,000.00, respectively. For its part,
Sulpicio Lines claimed that the vessel is seaworthy, it being cleared to sail from the port by the
proper authorities. It also claimed that there was no negligence on the part of its employees and
that the sinking was due to a fortuitous event. RTC ruled in favor of Sesante, holding Sulpicio
Lines liable under Article 1739 and 1759 of the Civil Code. However, it reduced the award for
moral damages. CA affirmed but further reduced the award of moral damages but Sulpicio Lines
was still dissatisfied with the Decision. Sulpicio Lines claimed that none of the instances under
Article 2201 were present in this case as to make it liable for the award of damages.
Issue:
W/N Suspicio Lines should be held liable to pay moral damages and temperate damages for
injuries sustained by Napoleon
Held:
Yes. The award of moral damages and temperate damages is proper. We agree with the
petitioner that moral damages may be recovered in an action upon breach of contract of carriage
only when: (a) death of a passenger results, or ( b) it is proved that the carrier was guilty of fraud
and bad faith, even if death does not result. However, moral damages may be awarded if the
contractual breach is found to be wanton and deliberately injurious, or if the one responsible
acted fraudulently or with malice or bad faith.
The negligent acts of the officers and crew of M/V Princess of the Orient could not be ignored in
view of the extraordinary duty of the common carrier to ensure the safety of the passengers. The
totality of the negligence by the officers and crew of M/V Princess of the Orient, coupled with
the seeming indifference of the petitioner to render assistance to Sesante, warranted the award of
moral damages.
While there is no hard-and-fast rule in determining what is a fair and reasonable amount of moral
damages, the discretion to make the determination is lodged in the trial court with the limitation
that the amount should not be palpably and scandalously excessive. The trial court then bears in
mind that moral damages are not intended to impose a penalty on the wrongdoer, or to enrich the
plaintiff at the expense of the defendant. While the anguish, anxiety, pain and stress experienced
by Sesante during and after the sinking cannot be quantified, the moral damages to be awarded
should at least approximate the reparation of all the consequences of the petitioner's negligence.
The award of temperate damages was also proper. The petitioner claims that temperate damages
were erroneously awarded because Sesante had not proved pecuniary loss. Temperate damages
58
may be recovered when some pecuniary loss has been suffered but the amount cannot, from the
nature of the case, be proven with certainty. Article 2224 of the Civil Code expressly authorizes
the courts to award temperate damages despite the lack of certain proof of actual damages.
Indubitably, Sesante suffered some pecuniary loss from the sinking of the vessel, but the value of
the loss could not be established with certainty. The CA, which can try facts and appreciate
evidence, pegged the value of the lost belongings as itemized in the police report at P120,000.00.
The valuation approximated the costs of the lost belongings. In that context, the valuation of
P120,000.00 is correct, but to be regarded as temperate damages.
In fine, the petitioner, as a common carrier, was required to observe extraordinary diligence in
ensuring the safety of its passengers and their personal belongings. It being found herein short of
the required diligence rendered it liable for the resulting injuries and damages sustained by
Sesante as one of its passengers.
59
Coca-Cola Bottlers Philippines, Inc. v. Spouses Jose R. Bernardo and Lilibeth R. Bernardo,
doing business under the name and style Jolly Beverage Enterprises
G.R. No. 190667, November 7, 2016
(Damages; temperate; moral; exemplary)
Facts:
Coca-Cola is a domestic corporation engaged in the large-scale manufacture, sale, and

distribution of beverages around the country. Jolly Beverage Enterprises is engaged in the
wholesale delivery of soft drinks in Quezon City. In 1987 Coca-Cola designated JBE as
distributor and they entered into an exclusive dealership contract for three years. For the past 13
years, the parties had good and harmonious relationship. However, in 1999, JBE discovered that
Coca-Cola started reaching out to the formers customers through a list provided by JBE as
required by Coca-Cola, giving them promos and selling their product at a lower price. Because
of these schemes, JBE lost both their major customers and some of its small store customers.
This prompted JBE to file complaint for damages, alleging that the acts of Coca-Cola constituted
dishonesty, bad faith, gross negligence, fraud, and unfair competition in commercial enterprise.
Coca-cola denied the allegations.
RTC held Coca-Cola liable for abuse of rights in violation of Articles 19, 20, and 21 of the Civil
Code and for unfair competition under Article 28. In its Decision, RTC ordered Coca-Cola to
pay JBE temperate damages amounting to P500,000.00, to be offset with their outstanding
obligation to Coca-Cola, plus moral and exemplary damges, as well as attorneys fees. Coca-
Cola argued that RTC had no jurisdiction to award temperate damages because it was not prayed
for in the complaint. It also claimed that there was no violation of Articles 19, 20, 21, and 28,
and thus the award of moral and exemplary damages were not proper. CA affirmed the RTC
Decision.
Issue:
W/N The award of temperate damages not prayed for in the Complaint, as well as moral and
exemplary damages, and attorneys fees are proper.
Held:
Yes. The CA did not err in affirming the finding that petitioner was liable for temperate, moral
and exemplary damages, as well as attorney's fees, tor abuse of rights and unfair competition.
Petitioner is liable for damages for abuse of rights and unfair competition under the Civil Code.
Both the RTC and the CA found that petitioner had employed oppressive and highhanded
schemes to unjustly limit the market coverage and diminish the investment returns of
respondents.
Articles 19, 20, and 21 of the Civil Code provide the legal bedrock for the award of damages to a
party who suffers damage whenever another person commits an act in violation of some legal
provision; or an act which, though not constituting a transgression of positive law, nevertheless
violates certain rudimentary rights of the party aggrieved. The provisions read:
Art. 19. Every person must, in the exercise of his rights and in the performance of
his duties, act with justice, give everyone his due, and observe honesty and good
faith.
Art. 20. Every person who, contrary to law, wilfully or negligently causes damage
to another, shall indemnify the latter for the same.
60
Art. 21. Any person who wilfully causes loss or injury to another in a manner that
is contrary to morals, good customs or public policy shall compensate the latter
for the damage.
As explained by this Court in GF Equity, Inc. v. Valenzona:
The exercise of a right ends when the right disappears; and it disappears when it is abused,
especially to the prejudice of others. The mask of a right without the spirit of justice which gives
it life is repugnant to the modern concept of social law. It cannot be said that a person exercises a
right when he unnecessarily prejudices another or offends morals or good customs. Over and
above the specific precepts of positive law are the supreme norms of justice which the law
develops and which are expressed in three principles: honeste vivere, alterum non laedere and jus
suum quique tribuere; and he who violates them violates the law. For this reason, it is not
permissible to abuse our rights to prejudice others.
Meanwhile, the use of unjust, oppressive, or high-handed business methods resulting in unfair
competition also gives a right of action to the injured party. Article 28 of the Civil Code
provides:
Art. 28. Unfair competition in agricultural, commercial or industrial enterprises or

in labor through the use of force, intimidation, deceit, machination or any other
unjust, oppressive or highhanded method shall give rise to a right of action by the
person who thereby sutlers damage.
Temperate, moral, and exemplary damages, as well as attorney's fees, were properly awarded.
The CA correctly ruled that the award of temperate damages was justified, even if it was not
specifically prayed for, because 1) respondents did pray for the grant of "other reliefs," and 2) the
award was clearly warranted under the circumstances. Indeed, the law permits judges to award a
different kind of damages as an alternative to actual damages:
Civil Code, Art. 2224. Temperate or moderate damages, which are more than
nominal but less than compensatory damages, may be recovered when the court
finds that some pecuniary loss has been suffered but its amount cannot, from the
nature of the case, be provided with certainty.
Compensatory damages may be awarded in the concept of temperate damages for injury to
business reputation or business standing, loss of goodwill, and loss of customers who shifted
their patronage to competitors
It is not extraordinary for courts to award temperate damages in lieu of actual damages.
In Canada v. All Commodities Marketing Corporation, this Court awarded temperate
damages in recognition of the pecuniary loss suffered, after finding that actual damages
could not be awarded for lack of proof. In Public Estates Authority v. Chu, this Court
held that temperate damages should have been awarded by the trial court considering that
the plaintiff therein had suffered some pecuniary loss.
61

Civil Law Review 2 Digests (2016)

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Arellano University School of Law

Taft Avenue corner Menlo Street, Pasay City

CIVIL LAW REVIEW 2

Anne Meagen DC. Maningas

Student number: 2012-0641

Atty. Crisostomo A. Uribe

A. Sources of Civil Obligations

B. Kinds of civil obligations

Spouses Alexander and Julie Lam v. Kodak Philippines, Ltd. ........................... 7

C. Compliance with civil obligations

Philippine Science High School - Cagayan Valley Campus v. PIRAA

D. Breach of contractual obligations

Tarcisio S. Calilung v. Paramount Insurance Corporation, RP Technical

E. Remedies for Breach of obligations

Dr. Restituto C. Buenviaje v. Spouses Jovito R. Salonga and Lydia B.

F. Modes of extinguishment of obligations

A. Fundamental characteristics of contracts

Teresita I. Buenaventura v. Metropolitan Bank and Trust Company ............ 16

Vicente D. Cabanting and Lalaine V. Cabanting v. BPI Family Savings Bank,

Anecito Campos v. Bank of the Philippine Islands .............................................. 19

Century Properties, Inc. v. Edwin J. Babiano and Emma B. Concepcion ..... 20

1. according to solemnity or form

IBM Philippines, Inc. v. Prime System Plus, Inc. ................................................. 22

C. Kinds of contracts as to validity

The Roman Catholic Bishop of Tuguegarao v. Florentina Prudencio, et al. . 23

Desiderio Ranara, Jr. v. Zacarias de los Angeles, Jr. .......................................... 25

Mactan Cebu International Airport Authority v. Heirs of Gavina Ijordan .. 27

D. Essential elements of contract

Timoteo Bacalso and Diosdada Bacalso v. Gregoria B. Aca-ac, Eutiquia B.

E. Breach of contractual obligations

Philippine Science High School - Cagayan Valley Campus v. PIRAA

1. Contract of sale and contract to sell

B. Elements of a contract of sale

1. consent of the contracting parties

Melecio Domingo v. Spouses Genaro Molina and Elena B. Molina ................. 36

C. Remedies for breach of contract

1. Sale of movables on installments

Equitable Savings Bank v. Rosalinda C. Palces .................................................... 37

A. Termination of the lease

1. Loss of the thing

Magellan Aerospace Corporation v. Philippine Air Force ................................. 41

B. Essential elements of contract of agency

1. Form of contract of agency

Mactan-Cebu International Airport Authority v. Richard E. Unchuan......... 42

C. Obligations of the agent

Bank of the Philippine Islands And FGU Insurance Corporation (Presently

A. Obligations of partners with regard to third persons

Michael C. Guy v. Atty. Glenn C. Gacott ............................................................... 48

Jose Norberto Ang v. The Estate of Sy So .............................................................. 50

VIII. CREDIT TRANSACTIONS

A. Pledge, mortgage, antichresis

1. Provisions common to pledge and mortgage

Rosalina Carodan v. China Banking Corporation ............................................... 54

IX. TORTS AND DAMAGES

Greenstar Express, Inc. and Fruto L. Sayson, Jr. v. Universal Robina

Moral damages; temperate damages

Sulpicio Lines, Inc. v. Napoleon Sesante ................................................................. 58

Coca-Cola Bottlers Philippines, Inc. v. Spouses Jose R. Bernardo and

(Obligations; sources of civil obligations; quasi-delict)

Spouses Alexander and Julie Lam v. Kodak Philippines, Ltd.

(Obligations; Kinds of civil obligations as to performance of prestation; divisible, indivisible;

4. Minilab Equipment Package shall be payable in 48 monthly installments at

5. Prevailing price of Kodak Minilab System 22XL as of January 8, 1992 is at